Bonanza or bust

The recent oil discovery has heightened expectations of a major find

Following several years of disapppointments, the search for oil in Irish waters has regained some of its oriiginal enthusiasm after Phillips' recent small, commercially unviable find in the Porcupine Basin off the West Coast.

Since 1970, when drilling started, the search had floundered, with 50 wells drilled and only one, the Kinsale Gas Field, coming into production. Until the recent discovery, there was a grave dannger of the oil companies losing interest in offshore exploration here. There is now renewed hope for a commercial find within the next three years.

A major oil find is becoming even more critical to Ireland's job creation programme which, within 18 months of the Fianna Fail government coming to power, is already dropping badly behind its target. Ireland must create approxiimately 20,000 jobs per year over the next eight years if the present employyment levels are to be maintained. With the restraints on borrowing, it seems the present policies will fail to generate more than 15,000 jo bs per year.

Oil in the Irish economy would sallvage the situation by providing the financial impetus which could lead to full employment.

While the newspapers ran headlines Wcalling the recent Phillips oil find in the Porcupine Basin "Black Gold", those connected with the oil business confidently dismissed such talk as foollish and naive. The Government took up the much repeated catch phrase "cauttiously optimistic" to describe its feellings about the 730 barrel-a-day commmercially unviable flow Phillips reportted. At best, some oil companies conceded they were encouraged by the report.

The week following the Phillips annnouncement a curious shift by the Govvernment became apparent. When the minister for Industry, Commerce and Energy, Desmond O'Malley, addressed the first meeting of the Irish branch of the Institute of Petroleum, the governnment's favoured catch phrase seemed to have been dropped from the minister's lexicon and a slightly more optimistic tone adopted. "I do not think I'm straining optimism too far," he said, "when I say there must now be good prospects that a future well will come up with a situation in which all the necessary criteria will come together in circumstances which constitute a commmercial discovery." In the following disscussion of the possible construction of an oil refinery and the formation of a national oil company, the minister alllowed a small glimpse at what an oillproducing Ireland might be like.

A number of geologists and oil exxperts in and out of the Department `but excluding those from the oil commpanies - have since said that all the conditions for oil being present are satissfied in the Porcupine Basin. Information from 50 wells and seismic surveys have convinced them that the oil is there; it is only a matter of finding it in large enough quantities to make the costly production in Porcupine's deep water profitable.

The Government's recent buoyed opptimism is as much due to the Phillips find as to the game it plays with the oil companies. The Government, by latchhing onto all the positive signs of a commmercial oil find, and the oil companies, by holding up the discouraging ones, hope to strengthen their respective barrgaining positions. The Government hopes to keep the companies searching, and the companies are looking forward to further negotiations involving new search areas and new terms for their current licences.

The oil companies remain steadfastly between any extreme of opinion. When they say Irish waters might hold commmercial oil reserves, they pause only long enough for the statement to justify their spending of more than £60 million this year on exploration here. They quickly follow up that in the past two years of drilling, there have been no subbstantial finds other than Phillips' and that since it was reported, Elf-Aquitaine and BPjAran plugged and abandoned their Porcupine wells.

Exploring for oil is still an inexact science, as the companies are fond of saying, and only drilling a well which strikes oil can prove it is there. Geoloogists know that oil deposits are found in sedimentary basins such as Porcupine or Fastnet, and they are what first brought exploration to Ireland. Information from the exploration has shown the sedimentary basins around Ireland, Porrcupine in particular, have ocean floor structures of the right kind: rock of adeequate thickness, proper mixture of reservoir and source rocks, and deep enough burial of rocks to generate the optimum amount of heat for the forrmation of oil. The only condition unnsatisfied by the exploration so far is a commercial reservoir with large recoverrable reserves.

Porcupine, Fastnet, Donegal, Kish Bank, and Sea Craben, where Marathon, Esso, and 11 consortia (groups of commpanies "pooling their expenses) are now exploring for oil and gas (see map), were formed millions of years ago by microoscopic sea animals called plankton. As they died, the plankton piled up and were sealed in mud. Bacteria, chemical action, and their own weight turned the mud into shale, the source rock for oil. Some of the oil seeped into the ocean, but what was trapped by a layer of immpervious Jock remained stored in a perrmeable rock reservoir, such as sandstone, in much the same way as water in a sponge. The trapped oil is usually locatted in a dome-shaped rock structure or a faulted one. When the ocean floor around Ireland was mapped by seismic studies, these were the structures the companies wanted to pinpoint.

Another reason to believe that Irish waters should have oil deposits, is that oil has been found in the North Sea and along the eastern coast of North America, from where Ireland broke away when the present continents forrmed.

If the Phillips discovery hadn't been made and the possibility of oil reeserves proved, government officials addmitted they would now be worried. While the oil companies play down the importance of the Phillips well, there is sure to be a move to Porcupine next seaason. Waldemar Gurke, managing direcctor of Deminex Ireland, the only commpany still drilling this season, said that it is too soon to make any conclusions about Porcupine, but added, "You can't cover an area so vast with only 13 wells. "

The Porcupine Basin, while it may give the best odds for an oil discovery, is the" most expensive region to drill, with one well costing £8 million, twice as much as one in Fastnet, the area off the south coast where drilling has taken place since 1970. Water depths of more than 1400 feet and violent weather connditions make special equipment necesssary in the Porcupine Basin. Additional expense is caused by the distance from shore. The nearest port, Fenit, Co. Kerry, is 100 miles to the east.

Onshore, the Phillips well could have easily been put into production, but in the deep Porcupine Basin, the oil flow was too small to cover development costs. The recoverable reserves - the amount of oil which can be extracted from an oil field during its lifespan  that Deminex considers profitable would be from 700 million to 1000 milllion barrels. Spokesmen for Shell and Amoco, larger companies than Derninex, said for them an economic recoverable reserves figure would be closer to 3000 or 4000 million barrels. These amounts of oil would be from one field comprising several production platforms each with many wells tapping the reservoir.

In his speech to the Institute of Pettroleum on October 10, O'Malley said the government is prepared to lower its take from oil production, which could be as high as 79 per cent, if it will enncourage companies to develop an otherrwise uncommercial field.

Eleven consortia, in addition to Marathon and Esso, which operate under an earlier agreement, were awardded the right to drill in Irish waters under the 1975 Exclusive Offshore Licensing Terms. The terms permit the state to take up to 50 per cent of the shares in an oil company formed to develop an oil field, from eight tq 16 per cent royalty on daily production, and taxes on the company's profits. The state will pay its portion of retroactive exploraation costs, but only on wells which prooduce an oil field.

Each consortium negotiated separaately with the government for its licennces. The deals the companies made inncluded bonus payments to the governnment, scholarship money for training in oil related fields, and the taking on of non-paying Irish shareholders or carried interest. From 1976 tor978 the governnment netted £4 million from licensing fees, rentals, bonuses and scholarships paid by the oil companies.

Oil exploration began in Ireland in 1959 when the Madonna Oil Commpany received an exclusive licence for' the entire onshore and offshore area. Marathon took over the licence in 1970 and has gradually relinquished much of the original territory, It farmed out half its blocks to Esso in 1971.

Sixty companies received nonsive licences in 1971 which allowed seismic surveys to be made in areas not held by Marathon and Esso. It was from the information gathered during this period' that the companies made their bids to the government for the 1975 blocks. The consortia who received blocks in 1975 can hold them for six to nine years depending on water depth øthe deeper the water, 'the more time companies have to drill - providing they fulfil their drilling commitments.

Once an oil reservoir has been found by drilling, it may take two years to deetermine the reserves and then as many as eight years more before production can begin. Ten years from now a barrei of oil is likely to be selling at 20 dollars. A field with recoverable reserves of 700 million barrels will produce an average of 100,000 barrels a day. That oil will earn 700 million dollars a year.

O'Malley has talked about trading off some of the state's participation for a higher royalty in order to bring money into the exchequer faster. The immediiate cash flow from a field producing 100,000 barrels a day - a small field pat 16 per cent royalty will be almost £58 million a year. Add the state's share of the profits and taxation of the cornnpanies, and Ireland's take increases subbstantially.

While there will be no oil production for at least ten years, a commercial oil discovery next season could have immeediate consequences for the economy. Once oil is found, the boom in oiled jobs will begin. An oil discovery next season would make the government freer to increase its borrowing and ennable it to meet the nation's job needs. The government borrowed heavily this year for that purpose, and unless it is assured of large amounts of cash in the near future, it will be hesitant to conntinue borrowing.

The most obvious benefit of an oil discovery will be the reduction of Ireeland's balance of payments deficit. In 1977, the bill for imported oil was about £329 million, 61 per cent of the national trade deficit. The oil from just one small field would be almost enough to meet Ireland's oil requirements, wipping out a large portion of the' trade deficit.

This season had been called a "make it or break it" year for an oil disscovery. Apparently the Phillips find made it. Or, at least the government hopes it appears that way. Five wells are committed to be drilled next season arid there is a possibility of six others. As usual, the oil companies are barely optiimistic and the govern merit firmly optiimistic about finding commercial quanntities of oil. The analysis of information collected this season and next season's drilling results should determine wheether the drilling goes on into the 1980s. And that prediction, like any prediction about oil exploration, is subject to change.

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Sedco 709

An 18 seat KLM helicopter was readdied to leave Shannon Airport at noon for its regular two hour trip into the Atlantic. A half a dozen burly young men, each carrying a single suittcase, raced from the airport bus to the copter's baggage compartment. Falling over each other, they clamoured for space to stuff their belongings so they could hurry and board the helicopter. Several bank managers, Derninex office workers, and two journalists uncertainnly followed this gang into the chopper.

Since August 10, when Deminex began work on its last commitment well, helicopters have . left Shami.on twice a week for the Porcupine Basin in the Atlantic. Most times', passengers are rig crewmen: roughnecks, roustabouts, drilllers, tool pushers, engineers, and techhnicians or Demiriex employees.

The helicopter first travers along the Shannon River. It is only a few thoussand feet high and the pattern of farms, towns, and shore is clear. Soon, though, the lush fields give way sharply to the brown coastal cliff. The remainder of the trip is over a featureless ocean.

When the helicopter suddenly sets down on the deck of the Sedco 709 drilling rig, the gang of roustabouts reepeat the clamour for their baggage. They have just finished their two weeks off and now are about to start 14 days of straight work, unloading delivery boats and maintaining the rig.

Before work starts they 'are entitled to a meal. They lined up together ~ the 40 seats mess hall where there was a choice of Salisbury steak, 'cold meat platters, soups, prawns, olives, cheese, fruit, and sweets. There is no alcohol allowed on the rig.

There was barely a sense of moveement. The men were reminded that there they were back at work by the sign under the clock reading: "Make hole, not war."

Once on the rig, night and day makes little difference for the 80 men on board. Work goes on round the clock. Each man works a 12 hour shift. Free time is spent sleeping, watching a film on the video television, and playing cards or reading. The men . have the choice of working 14 or 28 day strettches with equal numbers of days off.

The salaries per month for crewmen run from £600 for roustabouts, who are mainly Irish, to £1500 for engineers and rig supervisors, usually foreign worrkers.

The rig is only the size of a small city block, but it is easy to get lost in the intricacies of its red, yellow, blue and white steel structures. The rig is on several levels. It measures 295 feet at its widest and weighs 13,000 tonnes.

The Sedco 709 is one of three rigs in the world that uses "dynamic positionning" and is kept in place without anchors. Basically, the platform rests on a pipe sitting on the ocean floor. Proopellors under the platform are conntrolled by a computer. The platform is raised and lowered 'as the propellors' speeds are adjusted. The pipe never moves.

The rig supervisor, giving the guided tour, pointed to four men, called roughhnecks, who were doing a roundtrip. They were pulling up the entire length of pipe they had drilled more than a mile into the ocean floor and replacing sections with new pipe. They could reemove the pipe at 1 ,000 feet per hour, said our guide, but he couldn't disclose how long the whole operation would take because from that information, the depth of the well could be calculated.'