asked the Minister for Energy in order to allay public disquiet if he will explain the reason he awarded four exploration blocks in the third round of licensing to consortia which included a company who hold substantial stakes in those licences, but who failed to meet their financial obligations on other licences, and had to surrender their interest in very recent times; and if he will make a statement on the failure of the third round to attract applications for only 15 out of the 76 blocks on offer.
Written Answers. - Exploration Licences.
26.
From his own experience as the Minister who announced the results of the second licensing round in June 1982 when out of a toal of 108 blocks on offer 24 were allocated under the licences then awarded, I am sure that the Deputy is aware that the success or otherwise of the third round, for that matter, should not be measured simply by the proportion of blocks on offer that are licensed. This falls into the error of assuming that every square or block on the map has the same hydrocarbon potential and the same prospectivity, which is not the case. It was recognised by my Department when the 77 blocks were offered that many could well be of limited interest to the oil exploration industry.
The success of a round depends essentially on whether it leads to a continuing, satisfactory level and quality of exploration over the blocks on offer, with the degree of satisfaction to be measured in terms of what is considered to be appropriate and necessary in order to have an area fully explored. Far from being the failure claimed by Deputy Reynolds, the third round was a success because, first it resulted in a large amount (6,500 km) of new seismic data being made available to the industry and to my Department. Prior to the round there was only a superficial knowledge of many of the 77 blocks, but, by virtue of the fact that these blocks were put into the round, my Department was enabled to reach agreements with seismic contractors, which resulted in this very large volume of seismic data becoming available at no cost to my Department. This data enabled the acreage to be properly assessed for the first time in the case of many of the blocks.
Secondly, of the blocks on offer in the round which were considered by my Department to be of significant prospectivity and, therefore, worthy of licensing with drilling commitments well over half have been licensed. Only when the seismic which I referred to had been acquired was it possible to determine which blocks were significantly prospective. There were less than 30 blocks in that category and of these there are six which, for good technical reasons, are not attractive to exploration companies at this time. Of the remaining blocks, 15 are licensed and as I mentioned in my statement on 21 October, the grant of exploration rights in respect of further blocks is under consideration.
Thirdly, the level of work commitments for the 15 licensed blocks is the maximum that could be achieved at this time. About 6,000 kms of seismic is committed and there is provision for the drilling of at least 15 wells within the first four years of the licences. My contention that the third round was successful therefore is clearly substantiated.
I consider that it would be inappropriate for me to discuss matters of a confidential-commercial nature in relation to any specific company. However, I must point out to the Deputy that I must be cautious about assuming that any particular company will not at some future date meet its commitments when these become due, especially in cases where obligations may not mature for some time.
The licence groups concerned were obviously satisfied to have the company in question as a partner in their consortia, and in so far as the State is concerned, it is the overall capability of a group as a whole to carry out its obligations under the licences in question which is important. This criterion is clearly met in all of these cases. I might add that it is not unusual for a partner in a licence to opt out of a particular obligation either by diluting or surrendering its interest.
I understand that in the case of at least one of the other licences referred to by Deputy Reynolds, the company in question has proposed a certain course of action to its partners with a view to resolving the difficulties which have arisen.
It should not be overlooked that the company through its subsidiaries has participated in some 18 wells offshore Ireland. The company has, therefore, been in a position to trade data from many other wells. It has also purchased data from many Irish and UK wells; consequently, the company has a substantial data base, and it is seen as being very well placed to make detailed technical assessment of the Irish offshore. Its technical presentations in the third licensing round ranked among the best.
28.
asked the Minister for Energy if he can clarify reports that a number of major United States oil companies, and some Irish companies have not applied for exploration licences under the third round; if he feels that interest may be generated by appropriate terms; and the number of wells he expects to be drilled in 1986 and 1987.
It can of course be accepted that a number of major United States oil companies did not participate in the third round. Equally it must be accepted that a number of the major United States oil companies did participate in the third round as did a number of other large international companies. Among those participating were BP, Britoil, Total, Texas Gas, Arco and Conoco. As regards Irish companies, all those hitherto involved in the Irish offshore applied for participation in licences under the round.
As regards the licensing terms taking into account my recent statement clarifying the position in relation to marginal fields, the terms now in place, combined with the new taxation arrangements have in general been well received by the industry. At least ten wells are expected to be drilled in 1986, the highest number to be drilled in any single year since 1978. It is not possible at this stage to be precise on the numbers of wells to be drilled in 1987 as to some extent this will depend on decisions still to be taken. I would expect, however, to see the momentum of drilling maintained in that year.