Tony O’Reilly is the CEO of Providence Resources, an Irish independent that has in its portfolio perhaps some of the most promising assets offshore Ireland, including Burren, Dunquin and Spanish Point.
He started Providence 13 years ago by spinning it out of a mining company called Arcon, which developed Ireland’s first zinc mine in 25 years.
Arcon was the amalgamation of two companies – Atlantic Resources, which is the famous Irish junior explorer of the 1980s, and Conroy Exploration, which was an Irish explorer that started offshore but eventually moved onshore and became involved in mineral exploration.
In the Providence portfolio today is an Atlantic Frontier asset known as Spanish Point. Atlantic Resources was a stakeholder in the prospect when operator Phillips Petroleum drilled back in 1981 and had been formed that year with the specific purpose of pursuing such targets.
The catalyst was the Burren oil discovery of 1979, which had also been made by Phillips.
The Spanish Point well would probably have been judged a success if it had been drilled today as it revealed what O’Reilly describes as a “a high-yield gas-condensate play”.
O’Reilly: “They tested one of the four sands, but there was skin-factor damage, so they mobilised a frac vessel from Aberdeen to assist in fracturing the reservoir.
“But the vessel was never able to do the job. It was stopped by a 100-year storm. Phillips said that the oil in place was potentially 400million barrels oil equivalent. The commercial threshold at the time was 500million barrels and it was complicated by the lack of any infrastructure offshore Ireland at that time. Phillips walked away.
“Chevron and Statoil picked Spanish Point up in the 1990s. They did 2D seismic and confirmed the structure.
“We understand, through the papers, that they were moving towards some sort of a field development plan. But in the late-1990s, oil prices collapsed, Chevron took over Texaco and they elected to get out.
“We picked it up in 2004, and it’s really thanks to John O’Sullivan (heritage Mobil and Marathon), our technical director, who said that Providence’s asset portfolio was too Celtic Sea.
“Having worked for Marathon, he knew something about the Atlantic Margin and said we should take a look as a lot of discoveries had been made, but none commercialised.”
Today, Spanish Point is thought to have a lot going for it; Burren, too. And both are proven discoveries where hydrocarbons have been flowed.
O’Reilly picked up the licences under the Irish “promote” scheme at the same time as the hugely important Dunquin gas prospect. He had listened to O’Sullivan and acted.
Thus began a four-year grind, sifting data, building possible reservoir models, trying to get a grip on reserves potential and coming up with development ideas. What if Spanish Point turned out to hold resources of 1.42trillion cu ft of gas and 150million barrels of oil/condensate? It would be a huge prize.
“We brought in specialists like Schlumberger and TRACS. Then we started a farm-out process that led to our relationship with Chrysaor.”
Since then, 3D seismic has been run and suggests quite a significant reservoir.
“The original discovery well encountered a 1,400ft gross hydrocarbon column. So the fact that we could see 750ft up-dip from that, coupled with a much better structure with a lot less faulting, means Spanish Point is looking a lot better.
“The two other interesting things that came out of the 3D seismic is that, at Burren, we can start to see the extent of what we believe is a stratigraphic trap which we could not previously see because the 2D couldn’t image volcanics, whereas we can with 3D.
“I joke that every prospect has a deeper prospect, but we were able to image a deeper prospect at Spanish Point using the 3D. It’s called Wilde.
“So Spanish Point is a complex of different assets at various stages, but we want to be in a position to drill in 2012.”
In recent years, the Dunquin gas prospect has caught a lot of attention on the Irish Frontier, not least because of Exxon’s decision to farm into this massive gas prospect.
Again, it was O’Sullivan who persuaded O’Reilly.
“He had a particular view about Dunquin’s structure … a carboniferous reef … and wove a picture of the resources that it could hold.
“We started a farm-out process and held talks for some time with a large company (not a super-major), but they fell through in 2005.
“That summer was a nervous time but, during the bank-holiday weekend in August, the phone rang. It was ExxonMobil. Within five months, we reached a deal, announced it and, within a further five months, we had shot 1,500km of 2D seismic.
“Basically, what this has done is catapult us into a different league with a different type of player that can deliver on a major prospect like this. Exxon subsequently brought Eni in for 40% stake, so there’s no doubt that Dunquin’s going to be drilled.
“The great thing for us, as a junior, is to have a world-class partner involved. This is a big well by any stretch of the imagination and, if it works out, we’re talking about big gas.”
Space does not permit us to explore Providence’s other major Irish interests in depth. However, both the Celtic Sea, to the south, and Kish Bank, off the east coast near Dublin, must be mentioned.
Starting with Kish Bank, the company’s position there grew out of its interest in developing gas storage through the use of subsea salt caverns in joint venture with Star Energy. O’Reilly and his team were in for a pleasant surprise when detailed analysis of existing data suggested the possible presence of a big oilfield.
Dubbed Dalkey Island, the Ulysses study confirmed a collective view that west Irish Sea geology was very similar to Liverpool Bay and Morecambe Bay, where gas and oil are harvested.
O’Reilly: “To cut a long story short, the work that we’ve done is leading us to a belief that, in Dalkey Island, we have a very large hydrocarbon-filled exploration target … maybe 300million barrels.
“I think the thing that is really exciting is that, in terms of bang for one’s buck, it will take a pretty low-cost well, perhaps $10-12million, because the structure is shallow, and it’s shallow water, too.”
A well is planned for H1 2011.
Providence has a fair scatter of potentials folded into its Exola satellite’s portfolio, much of it in the Celtic Sea. But, given its commitments to the Atlantic Frontier and Kish Bank, is it not already at full stretch?
The Celtic Sea is an area where a lot of wells have been drilled. According to O’Reilly, there have been 145-150 wells drilled offshore Ireland, of which 78 have been drilled in the North Celtic Sea, with a fairly high success rate.
However, due to structure or oil quality, or economics at the time, there was no commercialisation. As a result, the industry consigned the Celtic Sea to the status of a no-go area.
Not any more, perhaps. Although Providence, whose Celtic Sea assets are parcelled into a vehicle called Exola, drilled three wells in 2007-08, the results were inconclusive.
What has changed the game for O’Reilly is the decision to treat Celtic Sea resources as “unconventional” – heavy crudes, waxy stuff, that sort of thing.
“The fact that we suddenly announced that it was unconventional oil and that we’re willing to have an open-door policy … come in and talk with us … we are inundated.
“Two years ago, no one would take my calls. Now I’m the one getting the calls.
“There’s no doubt, there are a lot of barrels in place in the Celtic Sea basin, but it’s whether or not one can get them out.
“I still maintain that the first oilfield development offshore Ireland will come from the Celtic Sea.
“I’m clear about that, but it won’t be Providence going it alone.”