Professor Patrick Shannon is chairman the Irish Offshore Operators’ Association (IOOA) and has worked closely with the oil and gas exploration industry in Ireland for 40 years. Before joining IOOA, he was Professor of Geology at University College Dublin and prior to that held positions at the Petroleum Affairs Division of the Irish Department of Energy and the Geological Survey of Ireland.
Julian Turner: What were the key findings of the report by the IOOA and PwC on the potential value of Ireland’s domestic oil and gas industry?
Patrick Shannon: The January 2019 report, ‘Value of the Indigenous Oil and Gas Industry to Ireland’, concluded that the indigenous oil and gas industry could create over 1,500 jobs and deliver tax revenue of almost €11bn for the state. An oil find yielding 550-600 million barrels could create €16.25bn in expenditure, 1,200 jobs annually and provide tax revenue of €8.5bn over the life cycle of the project.
In addition, a gas find yielding 800 billion standard cubic feet could create €2.3bn in expenditure, 380 jobs per annum and provide tax revenue of €2.4bn over the lifetime of the project.
JT: Why is Ireland considering doubling down on oil and gas at a time when most countries are transitioning to low-carbon renewables?
PS: Aside from the financial benefits of such a find, the IOOA-PwC report also shows that developing indigenous oil and gas resources in Ireland would deliver carbon emissions benefits, as gas in electricity generation is 67% less carbon-intensive than peat and 61% less intensive than coal.
Similarly, oil is 33% less carbon-intensive than peat and 20% less than coal.
Furthermore, indigenous and European oil and gas have 30% less associated carbon emissions than imports from outside Europe. Ireland is 66% reliant on imported fossil fuels, and in the context of Brexit in particular, it is vital that indigenous energy sources are identified.
As well as the emissions reduction benefits that indigenous oil and gas provide, revenues generated from their exploration and extraction would also be vital in supporting Ireland’s transition to a low-carbon economy. The IOOA-PwC report notes that meeting Ireland’s 2050 carbon emissions reduction targets (80% carbon-reduction by 2050 compared with 1990 levels) would require €8.6bn of additional investment in infrastructure and renewable energy development.
New energy realities require a new, evidence-based energy conversation about Ireland’s energy mix and IOOA wants to be part of that conversation. We recognise that the transition to a low-carbon future needs to happen and that it is the right thing to do. Within that context, we need to look at issues such as ensuring a safe and secure energy supply, supporting economic growth and delivering essential services.
JT: What are the main hurdles hindering the further development of Ireland’s offshore sector?
PS: Ireland has two indigenous gas supplies – Kinsale and Corrib. The Kinsale field is almost depleted and decommissioning will commence in the next few years. Gas production from the Corrib field, while currently supplying most of Ireland’s gas requirements, is declining and production is expected to have ceased by 2031, with 100% of Ireland’s gas then having to be imported. 100% of Ireland’s oil needs also come from imported sources.
This underlines the importance of making new, indigenous offshore discoveries to secure Ireland’s energy supply, which is particularly important in the context of Brexit.
JT: What role does natural gas play in preserving Ireland’s energy security?
PS: IOOA believes that oil and gas will continue to play a vital role in meeting the world’s, and Ireland’s, energy needs in the transition to a low-carbon future, a view shared by the International Energy Agency (IEA), among others.
In particular, we recognise the benefits of natural gas, and believe it will play an increasingly important role in the energy mix in Ireland, helping to reduce greenhouse gas emissions.
In that regard, IOOA supports Irish Government policy to enhance Ireland’s security of supply by continuing to support offshore exploration and development of indigenous hydrocarbons, as both gas and oil are likely to remain critically important for Ireland’s sustainable future, especially given our geographically-isolated location lacking a comprehensive energy infrastructural network to the EU mainland.
The gas distribution network delivers gas to over 680,000 customers across Ireland and will be critical for maintaining energy supplies for homes, schools, hospitals and industry. The integrated gas infrastructure will be a key driver for economic development and maintenance of competition for Irish industry, as well as continuing to deliver high living standards in a modern economy during the energy transition.
IOOA notes and supports the ambition in the National Development Plan 2018-2027 for the “development of gas infrastructure projects to support regional and rural development and the low-carbon transition”.
JT: What needs to be done in terms of policy, regulation and investment to further exploit Ireland’s potential offshore resources?
PS: In terms of policy supporting offshore exploration, we note the outcome in relation to the Petroleum and Other Minerals (Development) (Climate Emergency) Bill 2018 which, if implemented, would have seen a ban on oil and gas exploration. The bill, which is opposed by the government, has not passed through the parliamentary committee stage. Any policy that may limit exploration in offshore Ireland would have a negative impact on Irish energy security, on the Irish economy and would not reduce carbon emissions in that Ireland would remain reliant on energy imports.
Therefore, it is vital that the environment exists for further exploration, and to that end, we note the increased interest in the Irish offshore in recent years, with record numbers of applications in the last Licensing Round.
It is likely that there will be one exploration well in the under-explored, deepwater Porcupine Basin in 2019. This year will also likely see the start of an appraisal drilling programme on the Barryroe oil accumulation in the Celtic Sea, and further exploration wells are being planned for 2020 and 2021, west of Ireland.
While the international exploration landscape has been challenging over the past few years, a number of IOOA member companies have been successful in sourcing new exploration partners for offshore Ireland. This reflects both the general global upturn and the perceived positive prospects in the Irish offshore.
JT: What impact has Brexit had (and will potentially have) on the Irish offshore industry?
PS: Ireland’s geographical location at the edge of Europe makes Ireland extremely vulnerable to any potential disruption to energy supplies. This is highlighted by our significant reliance on imported energy and compounded by the uncertainties surrounding Brexit.
Brexit increases energy security concerns and post-Brexit, Ireland will not have a direct connection to the main EU energy infrastructure. The IOOA-PwC report also estimated that the potential cost of a total blackout in Ireland for a day at €850m.
The IOOA-PwC report shows that Ireland’s energy security remains vulnerable, with 100% of all of our oil and 31% of all our gas imported, primarily through the UK, which is dependent on increasing imported energy from the EU, Norway and Russia. Developing indigenous oil and gas would provide greater security of supply for Ireland in the context of global geopolitical uncertainty, including Brexit.
Irrespective of the manner in which the UK departs from the EU, IOOA believes that it is vitally important for Ireland to secure its own indigenous energy supply as we transition to a low-carbon economy.