Dan White: 'Oil's well that ends well: where next for Irish explorers if Varadkar kills off black gold fantasy?'

Search goes on: Providence continues to seek oil at its Ballyroe field.

Dan White

Leo Varadkar's announcement of a ban, well sort of, on oil exploration in Irish waters looks set to finally bring the failed 50-year search for black gold off our coast to an end. Ever since oil was first discovered in the North Sea in 1969, the dream that we too might hit the energy jackpot has endured through good times and bad.

The discovery of the Kinsale gas field off the coast of Co Cork in 1971 fuelled the belief that the emergence of a major 'gusher' in Irish waters was only just around the corner.

During the two 1970s oil crises, as the Irish economy buckled under the weight of soaring prices, there was always the consolation that soon the tables would be turned and we too would be joining the Arabs in the ranks of the world's major oil producers. The Celtic sheiks would soon be strutting their stuff on the global stage.

One of those who joined the Irish oil hunt was Tony O'Reilly, then Ireland's most successful businessman and a former chairman of what is now Independent News & Media Group Limited, the publisher of this newspaper.

In February 1981, he founded Atlantic Resources to explore for oil in Irish waters. O'Reilly put his money where his mouth was, forking out half of the initial £1.25m (€1.4m) which the company raised from investors.

The shares took off like a rocket. What followed was a full-blown oil, or rather oil exploration share, mania.

In a second fundraising a few weeks later, Atlantic raised a further £2.5m, with the shares being priced at £1, twice what the initial investors had paid.

Atlantic was floated on the Irish Stock Exchange in April of that year, with the shares soaring from £2.90 to as high as £3.95 on the first day's trading. And they kept on rising.

On the October bank holiday Monday, when the Irish market was closed, the shares briefly touched £10 in London.

And then it all went wrong. The hoped-for oil proved darned elusive and by late 1983, the Atlantic share price had fallen back to just 42p. However, despite repeated dry holes, Atlantic and O'Reilly refused to be deterred.

It has gone through several iterations over the past 38 years, morphing into Arcon and most recently Providence.

The fortunes of Providence have waxed and then waned in recent years.

It is currently locked in an increasingly bitter dispute with Chinese firm APEC over the payment of a $9m (€8.2m) loan, agreed as far back as March 2018.

Under the terms of the loan, APEC would receive a 50pc share in Providence's Barryroe field, which the firm claims contains up to 311 million barrels of recoverable oil.

Meanwhile the Providence share price was trading at 6 cent this week, valuing the whole of the company at less than €37m.

The Atlantic/Arcon/Providence saga is emblematic of the entire Irish offshore oil exploration sector.

More than 160 oil and gas wells have been drilled in Irish waters since 1970, with only the Kinsale and Corrib gas fields so far yielding recoverable hydrocarbons.

If, after almost half a century of effort and billions of euro of exploration expenditure, this is the best we can do, should we not be asking if the geology is sending us a message?

The contrast between Providence and Tullow, by far the most successful Irish oil and gas company of the past half-century, is instructive.

After initial disappointments in Irish waters, Tullow quickly spread its wings.

It is now producing almost 90,000 barrels a day in the west African country of Ghana, has discovered reserves of 1.7 billion barrels in the east African country of Uganda, and potentially almost as much again in neighbouring Kenya. Tullow now has a market value of €3.5bn, almost 100 times that of Providence. If, instead of sticking grimly with Ireland, Providence had followed Tullow's example, would it too have delivered for its shareholders?

Now, Taoiseach Varadkar is moving to pull the plug on oil exploration in Irish waters. Addressing the UN Climate Action Summit this week, Varadkar pledged to end such exploration.

However, on closer examination, there was somewhat less to the Taoiseach's announcement than met the eye.

Not only will existing oil exploration licences be unaffected by the ban - to do otherwise would expose the Government to huge compensation claims from licence holders - but gas exploration and extraction will continue.

The Taoiseach justified this apparent anomaly on the grounds that natural gas was a "transitional" fuel. Just for good measure, it would appear that the exploration ban won't apply to all offshore Irish waters, with the Celtic and Irish seas remaining open for new exploration licences, at least for now.

This will leave Barryroe, located off the coast of Co Cork, unaffected.

Somehow, one can't help being reminded of St Augustine's famous plea: "Lord, make me chaste but not yet."

The proposed exploration ban has already attracted strong criticism from many of those in the sector, with Petrel Resources director David Horgan describing it as "illogical".

While Horgan may well be correct, somehow I can't help feeling that he is missing the point.

If we haven't discovered and landed oil in recoverable quantities after two generations of trying, will we ever do so?

Far from criticising Varadkar, maybe the long-suffering shareholders of Irish oil exploration companies should be thanking him for finally putting them out of their misery.