Releasing Ireland’s untapped potential
10th February 2014
The State’s role in offshore E&P
15th July 2014

Our window of opportunity

ERT-WH-HR-13 A greater focus on outcomes could make Ireland a leader in the sector, David Taylor writes.

At a debate hosted by the London Irish Business Society in early June, Minister of State, Fergus O’Dowd TD said: “Offshore Ireland has a significant potential for oil and gas finds. Recent discoveries and on-going petroleum research indicate a positive resource potential, but how this unfolds will vary depending on the level of exploration activity and its success.”

In speaking thus, the Minister was repeating what for many commentators are simple truisms. Nevertheless they need to be repeated and spelled out again and again: oil, gas, research, positive potential. His emphasis on the level of exploration activity and its success was well placed.

The weight of current government oil and gas promotional policy is on seismic data acquisition, the reappraisal of the licensing terms for fitness for purpose, and the selective promotion of opportunity by government officials in London and Houston. These efforts are all designed to ensure that this year’s licensing round is a ‘success’.

It is likely that a doubling in the rate of drilling, to say two wells a year, would be regarded as policy success but this is to put the emphasis on process as a measure of success rather than on outcomes. To match the Minister’s truism with another: “We need to begin with the end in mind.” In this case, this is the further discovery and commercial development of hydrocarbons, particularly gas, in the Irish offshore province.

Ireland’s electricity system began to decarbonise with the deployment of Kinsale gas. It accelerated with the investment in new gas-fired combined cycle plant and gained further traction by the deployment of wind and most recently by the import of power from the UK. At the same time, the growth in central heating and the progressive displacement of oil for heating with natural gas led to a sharp decline in coal and oil use in housing. The benefits of natural gas were widely felt. Securing our gas supplies into the future must surely rank as a primary policy objective.

Importing 91 per cent of our gas and relying on gas for 49 per cent of power generation, we have to face up to the risks attendant on a continuation of current trends. It is doubtful that any government or empowered energy institution could survive a lengthy interruption to our gas supply which, for the moment, is increasingly dependent on European imports and is tied to a single pipeline in Scotland. With the prospect of Corrib gas coming on stream next year, the appalling vista of a lengthy interruption is mitigated to the level of a tolerable risk.

In the absence of an alternative strategy, such as direct LNG imports, we would benefit greatly from another Corrib and a policy that is capable of achieving just what the Minister implied.

A heightened level of oil and gas exploration on the Atlantic margin and in Ireland’s vast offshore area would sit easily with the need to underpin Europe’s energy supply in the course of its transition to 2050 energy and climate goals.

Ireland’s record on policy risk is exemplary. Even so, it may be underrated abroad because of bad precedents in the UK, noisy dissenters at home, and some highly publicised failures in the consents processes. Thus reputational risk continues to impact on perceived prospects.

There is a window of opportunity to pitch to the industry in terms that it will appreciate and at the same time to set out a strategic goal that the majority of Irish people would laud. Such a twin-track approach to de-risking widely shared goals demands a professional and well-grounded promotional effort of the kind in which the Irish development agencies have excelled. If undertaken with the specific intent to secure our gas supplies it could, with popular support and in the context of the new licensing terms, settle some long-running urban myths and herald a new and mature attitude to oil and gas exploration and production.

While the opportunity has challenging political, social, economic and sustainable energy dimensions it holds out the prospect of enhanced energy security and of a new and vibrant industrial sector to help repair the hole in our finances. Norway and Denmark are net oil exporters with strong sustainable energy credentials. In the transition that is already under way, we need to embrace the possibility of doing likewise.

David Taylor is a former Chairman of the Energy Institute of Ireland.