Providence oil to start flowing this week
02:58, 4 March 2012 by Fearghal O'Connor
Providence chief executive Tony O'Reilly: "Now people will be able to talk about Irish oil". Photo: Tony O'Shea
Providence Resources saw its share price shoot up last week after announcing promising appraisal results, but it faces an even bigger week ahead with an expectation that oil will flow at its Barryroe well in the waters off Cork. This will make it the first ever commercially-viable well to flow off the Irish coast.
"It is going to be a hugely important week for us," said Providence chief executive Tony O'Reilly. "At the end of the day, while geologists and people in the industry know the facts and figures that we have already put out, the market wants to see flowing black crude."
Shares in the company jumped last week after it said the Barryroe appraisal well has so far provided better than expected results, but the coming week could be even more important for Providence, said O'Reilly.
"When it does flow in the next few days, it will be the first oil ever to flow in commercial quantities in offshore Ireland."
Early this week, Providence plans to measure the pressure, density and flow rate of the oil, allowing it to plan the number of wells needed to develop the field. O'Reilly said that a very good result for the company would be a flow rate of 1,800 barrels per day.
"We have proven the geological play. But now they are waiting to see if we can flow the oil. The reference points for Irish offshore have always been gas at Kinsale and Corrib. But now people will be able to talk about Irish oil."
O'Reilly was unwilling to predict whether the announcement of a positive flow rate will have a similar impact on the share price as last week's announcement had.
"You would like to think that the market would respond to good news in a positive way. Already last week we put out good news, but we now have to deliver the next step which is the flow rates. Barryroe is the first well in our six-well programme. We always said that any one of these wells coming in would be a game changer for us as a company and it looks like Barryroe is coming in," he said.
O'Reilly believes that success at Barryroe could also be a game changer overall for Irish offshore exploration. He predicts that Ireland, with its huge under-explored acreage, is on the cusp of an exploration boom similar to the one Cove Energy has benefited from in Mozambique.
"I think there are a lot of people watching what is going on offshore Ireland, whether it was news of a big company like Repsol coming in, positive news from the Barryroe well or the fact that Corrib is moving forward."
A big factor is also likely to be high oil prices but Providence's Celtic Sea drilling programme is not dependent upon current "ultra high” prices", said O'Reilly.
"We did not decide to do what we are doing because the oil price went over $100. Once we saw the oil price comfortably above $40, it really started to make sense for us to look at this whole area. I don't think any company would ever plan their business on these high oil prices. Nobody does. If you were to go to a bank to do financing for oil and gas they would probably give you $65 to $75 a barrel. Most companies would probably see that as the floor so they can consider projects with a rate of return at that level. Nobody would be planning a rate of return based on the current $125 oil price because just as quickly as it goes up it comes back down."
Providence chief executive Tony O'Reilly: "Now people will be able to talk about Irish oil". Photo: Tony O'Shea
Providence Resources saw its share price shoot up last week after announcing promising appraisal results, but it faces an even bigger week ahead with an expectation that oil will flow at its Barryroe well in the waters off Cork. This will make it the first ever commercially-viable well to flow off the Irish coast.
"It is going to be a hugely important week for us," said Providence chief executive Tony O'Reilly. "At the end of the day, while geologists and people in the industry know the facts and figures that we have already put out, the market wants to see flowing black crude."
Shares in the company jumped last week after it said the Barryroe appraisal well has so far provided better than expected results, but the coming week could be even more important for Providence, said O'Reilly.
"When it does flow in the next few days, it will be the first oil ever to flow in commercial quantities in offshore Ireland."
Early this week, Providence plans to measure the pressure, density and flow rate of the oil, allowing it to plan the number of wells needed to develop the field. O'Reilly said that a very good result for the company would be a flow rate of 1,800 barrels per day.
"We have proven the geological play. But now they are waiting to see if we can flow the oil. The reference points for Irish offshore have always been gas at Kinsale and Corrib. But now people will be able to talk about Irish oil."
O'Reilly was unwilling to predict whether the announcement of a positive flow rate will have a similar impact on the share price as last week's announcement had.
"You would like to think that the market would respond to good news in a positive way. Already last week we put out good news, but we now have to deliver the next step which is the flow rates. Barryroe is the first well in our six-well programme. We always said that any one of these wells coming in would be a game changer for us as a company and it looks like Barryroe is coming in," he said.
O'Reilly believes that success at Barryroe could also be a game changer overall for Irish offshore exploration. He predicts that Ireland, with its huge under-explored acreage, is on the cusp of an exploration boom similar to the one Cove Energy has benefited from in Mozambique.
"I think there are a lot of people watching what is going on offshore Ireland, whether it was news of a big company like Repsol coming in, positive news from the Barryroe well or the fact that Corrib is moving forward."
A big factor is also likely to be high oil prices but Providence's Celtic Sea drilling programme is not dependent upon current "ultra high” prices", said O'Reilly.
"We did not decide to do what we are doing because the oil price went over $100. Once we saw the oil price comfortably above $40, it really started to make sense for us to look at this whole area. I don't think any company would ever plan their business on these high oil prices. Nobody does. If you were to go to a bank to do financing for oil and gas they would probably give you $65 to $75 a barrel. Most companies would probably see that as the floor so they can consider projects with a rate of return at that level. Nobody would be planning a rate of return based on the current $125 oil price because just as quickly as it goes up it comes back down."
