Barryroe, Cork and oil: Ireland on cusp of boom?

Article published on Oct. 30, 2012
Article published on Oct. 30, 2012
An exploration firm has struck black gold off the Irish coast worth billions. Will it be enough to drag Ireland out of the economic abyss?

If you visited Ireland back in 2006 at the height of an economic boom known as the ‘Celtic Tiger’, you would have found yourself in a country characterised by prosperity and confidence. Walking through Dublin, you were surrounded by luxurious fashion boutiques and fancy restaurants, while BMWs and Mercedes cruised the streets. Economic success was visible everywhere. Visit today however, and you’ll be greeted by a completely different Ireland.

Spanking new airport terminals to say goodbye from

Those fashion boutiques are long gone, along with most of the plush restaurants. Instead of that incredible flair, boarded-up shops and businesses line the streets, while signs bearing ‘TO LET’ flutter in the wind. Your first glimpse of this new and depressing Ireland comes when you pass through Dublin airport’s brand new terminal 2. Constructed for €395 million, it was supposed to welcome visitors to one of Europe’s most affluent nations. Instead, it acts as Ireland’s emigration gateway – the very last thing the country’s young people see as they board flights to Australia, Canada and New Zealand in search of a new life. As you walk through the terminal, parents tearfully embrace their children before they leave. With no end to the financial crisis in sight, it’s a heart-wrenching experience.

The sparkling terminal provides Irish emigrants with one final glimpse of the Celtic Tiger’s legacy and days of achievement that seem lost and gone forever. EU statistics show that Ireland has an unemployment rate of 15%. Along with the young people of Greece, Portugal and Spain, it looks like emigration is the only way of escaping economic gloom and despair.

Providential

Amidst all the darkness, however, there is one chink of light. A recent announcement by Providence Resources, an Irish and UK oil exploration company operating off Ireland’s southern coast, might just bring some positivity back to the Irish mindset. After extensive drilling operations, a deposit equivalent to 1.6 billion barrels of oil was discovered at Barryroe in July. It is estimated that at least 280 million barrels should be recoverable, with potential revenue running into billions of euro. Tony O’Reilly, the CEO of Providence, was wildly optimistic about the find, stating that the Ballyroe oil field could prove as important to Ireland as the North Sea oilfields have proven to the United Kingdom.

Providence has determined that the average recovery rate will be 27% - much higher than initial forecasts of 16%. The BBC reported on O’Reilly’s reaction to the company’s findings: 'The great news is that Barryroe is on a path towards development. We hope there is a renaissance of interest by international companies who need to come to Ireland and help us to exploit our natural resources. We cannot do it alone.' The next important step in the project is attracting a major international company to help carry out the extraction process. Providence is already cooperating with leading oil multinational Exxon Mobil at its site at Drumquin, Northern Ireland – any potential partnership could be worth upwards of €1 billion. Providence has already undertaken an extensive study on oil recovery factors at Ballyroe. With the use of 22 horizontal water-injection wells and 41 horizontal production wells over a 25 year period, a recovery rate as high as 31% might be achievable.

The oil field is located near Cork, Ireland’s second largest city. O’Reilly wants the oil to be landed locally, stimulating the region and further exploration pushes in the Celtic Sea. Southern Cork already possesses an extensive industrial infrastructure, primarily due to the Kinsale gas field located nearby. There is also a pre-existing oil refinery at Whitegate, as well as a deep-water port capable of accommodating any support vessels. Oil prices are currently $100 per barrel and the extraction operation should prove exceptionally lucrative. Depending on the volume of oil extracted, Ireland should take at least 25% of all profits and these could rise to 40%.

Believeing and seeing

How has the news resonated with the Irish population? Will Ireland return to those affluent days of the Celtic Tiger? Considering the level of hardship in the country at present, locals are understandably struggling to embrace the sudden positivity. The attitude is more one of ‘we will believe it when we see it’. Despite the harsh austerity measures, Cork is still a lively, bustling success story. The Kinsale gas field, tourist revenue and the presence of multinational IT companies like Apple have ensured the city continues to prosper. Still, the potential impact of Ballyroe could turn Cork into the centre of the county’s oil industry and the Irish equivalent of Aberdeen.

The mood in Cork is one of cautious optimism. Some residents have proclaimed the oil companies are overloaded with false promises. They have also pointed out that the government gave away the leases to those companies for miniscule amounts, meaning any oil brought ashore will not lead to a reduction in petrol prices. There are also serious concerns about the impact of any oil projects on the environment…concerns that might skyrocket if BP becomes involved in Ballyroe. In fact, when one observes the history of natural resource exploitation in Ireland, there is real cause for scepticism. Shell has struggled to develop the Corrib gas pipeline for more than a decade, in the face of concerted local opposition that culminated in sabotage and violence. Scottish exploration firm Ramco Energy was plagued by production problems at the Seven Heads gas field near Kinsale. The situation grew so bad that the company was forced to sell its 86% stake in the project.

Despite the ongoing discussions and controversy, this story is a rare form of good news for Ireland. Everything should become more transparent whenever Providence finds a suitable international partner. Officials in Cork are already preparing for a potential oil boom and have revealed plans to construct a €40 million terminal at the city’s port. The area has already been toured by Exxon Mobil officials and ‘oil fever’ is spreading quickly. Unemployment in the area has fallen to 10% - a little lower than average level of 15% across Ireland. The rush for oil off the Cork coast may alleviate the situation and lead to an increase in jobs. Will it bring back the Celtic Tiger? Most say no.

Image: 'Excuse me Sir, Would you mind if I take a picture of you?'/ 'No No, Go ahead' (cc) D.so/ Flickr at River Lee - Cork, Ireland