On September 23 last year, then Taoiseach Leo Varadkar travelled to New York for a UN climate change summit. There, he told delegates – and the hydrocarbon extraction industry listening back home – that new oil drilling had come to an end in Ireland. He said:

“In the last week, on foot of a request from me, our independent Climate Change Advisory Council recommended that exploration for oil should end, as it is incompatible with a low-carbon future. They recommended that exploration for natural gas should continue for now, as a transition fuel that we will need for decades to come while alternatives are developed and fully deployed. I accept this advice and Ireland will now act on it.”

In the Programme for Government (PfG) later agreed in June, Fianna Fáil, Fine Gael and the Green Party agreed to ban new licences for the exploration and extraction of gas as well as oil. The extractives industry was not expecting this further blow.

On the day of Varadkar’s UN speech, Serica Energy, a UK oil and gas company active in the North Sea, abandoned its two frontier exploration licences in the Irish Atlantic. “Irish opportunities have been and are likely to continue to be much longer-term and the expense of maintaining the licences will be redirected to lower-risk, nearer-term opportunities in its core areas elsewhere,” Serica explained at the time.

While the company did not specifically reference new Government policy, its move marked the start of a long exodus. New documents from the Department of Communications, Climate Action and Environment show that offshore operators have relinquished nearly half of the exploration authorisations active at the time of the UN climate summit.

The briefing papers prepared by Department officials for their new Minister Eamon Ryan in June and published this month show that companies have abandoned five licensing options, which gives them first right to an exploration licence over an offshore area if they confirm interest, while only four remain active. Operators have also relinquished 19 exploration licences giving them the right to actively look for oil and gas in an area, with 23 remaining active.

Regular reports published separately by the Department have so far identified the holders of four of the options and 15 of the licences terminated since September 23. They include a range of international majors, such as US-based ExxonMobil, France’s Total, Norway’s Equinor and China’s CNOOC; domestic players including Petrel and Providence; and a string of other exploration minnows. 

Since the oil price crash caused by the Covid-19 pandemic this spring, global hydrocarbon players have been refining further where they target their investment. For many of them, Ireland doesn’t make the cut anymore.

Department reports also reveal that three companies have abandoned petroleum prospecting licences, which gave them the right to search for oil in unlicensed areas. In the most drastic move, Total abandoned both its exploration and prospection licences within three months of Varadkar’s speech. ExxonMobil, too, has now left Ireland entirely. 

In briefing papers, the Department’s petroleum affairs division confirms the policy since September 23 has been that any new licences are for natural gas only, excluding oil exploration. However, all applications and authorisations in place before that date are unaffected and still allow their holders to drill for oil. Officials analyse the impact of the changes as follows:

“In the most recent Atlantic margin licensing round held in 2015, an upward swing in interest in the Irish offshore was evident, with a number of large international companies choosing to invest in Ireland for the first time. There is particular interest in exploration close to Corrib, with a number of companies believing further commercial gas finds in the area are likely, which the existing Corrib infrastructure could be used to bring ashore.

“However, the Taoiseach’s announcement of September 2019 and the subsequent publication of new policy principles, industry sentiment has changed significantly. A number of companies have either expressed their intention to or have initiated proceedings to withdraw or surrender licenses and plan to shift investment to other international territories where they believe opportunities are greater.

“In the short term this will mean a reduction in revenue from licenses and lower international confidence in Ireland as a destination for exploration activity. In the longer term, a reduction in exploration activity will reduce further the prospect of additional commercial natural gas finds being made.”

The immediate revenue impact is limited. Exploration companies pay minor fees until they progress to advanced stages of exploration with real commercial potential. The licences abandoned since September contributed a total of less than €1 million annually to the Exchequer.

Concerns around failure to maximise the potential of the Corrib area off the Mayo coast, too, have yet to materialise. None of the authorisations adjacent to the existing gas field have been relinquished. Instead, several have graduated from options to firm licences, including one held by CNOOC. While the Chinese giant has given up its interests in the deep Atlantic, the only exploration permit it has retained is the one in the Corrib area.

Another promising area is off the coast of Barryroe in Co Cork, where Providence is exploring for both oil and gas. It is adjacent to the existing Kinsale gas field and successive wells have found oil. Providence is now in advanced talks with Norwegian-based SpotOn Energy on a farm-out agreement.

Ireland’s security of gas supply, however, is now a serious worry.

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A few weeks after Vardkar’s UN speech, industry leaders displayed a sombre mood at their annual Energy Ireland gala dinner last October. Speech after speech drew approval from the black-tied crowd by expressing dismay at the sector being so unloved – and clinging to the hope that the shift to renewable energy will, in fact, boost demand for natural gas for years to come.

Although the Irish Offshore Operators Association (IOOA) is “disappointed” by the extension of the licencing ban to new gas exploration, it is not trying to reverse the policy – instead lobbying to turn remaining existing licences into productive assets. “Our political system needs to wake up to the exposure to our security of supply and our regulators need to be aware of their role in progressing the existing remaining licences,” the IOOA’s chief executive Mandy Johnston told The Currency, claiming that the administration of concessions “has been marred by paralysis for the last number of years”.

“The commitment in the PfG contradicts the previous Government’s assertion that gas will continue to play a vital role in our transition to a lower-carbon society.”

Mandy Johnston, IOOA

Drawing from a policy paper issued last December, Johnston added: “The commitment in the PfG contradicts the previous Government’s assertion that gas will continue to play a vital role in our transition to a lower-carbon society. Moreover, it denies the nation the opportunity to reduce its carbon emissions by using a local supply and it robs the west of Ireland of considerable investment at a time when our country will need it most.” According to IOOA estimates, the Corrib gas field generated €1 billion in investment and 1,000 jobs over ten years for the north-west.

Instead, the new Government’s policy “is committing Ireland to importing all its gas from the UK and elsewhere in the future,” Johnston warned. “Under European law, Ireland must demonstrate that we have taken all the necessary measures so that in the event of disruption we have the capacity to satisfy the demands of society and our economy.”

This point is echoed by Department officials. They wrote in the new minister’s briefing papers:

“Over the coming years, Ireland’s demand for electricity is expected to increase as we electrify heating systems and increase the uptake of electric vehicles. Ireland’s increased demand for electricity, together with the phasing out of peat and coal, will lead to an increase in the amount of natural gas we use in the near term and its importance to the operation and stability of our electricity system.”

With 70 per cent of electricity due to come from renewable sources by 2030, gas-fired power stations that are easy to switch on and off will become crucial to plug the gaps when the wind doesn’t blow or the sun doesn’t shine – at least until large-scale energy storage solutions become commercially available.

Meanwhile, Ireland’s Kinsale produced its last gas last month. On a separate note, officials remark that the empty facility is now the focus of a joint project by Equinor and state-owned utility Ervia to capture carbon dioxide emitted by gas-fired power stations and bury it underground. 

They add that “natural gas output from the Corrib gas field is passed its peak and will continue to decrease in the coming years”. They forecast that Ireland’s dependence on gas imports will rise from 53 per cent in 2019 to 80 per cent in five years’ time and over 90 per cent in 2030.

With the planned Shannon LNG terminal also officially abandoned in the PfG, the only source of gas imports for the foreseeable future will be the existing pipelines connecting Ireland to Scotland. “There is currently no gas storage in Ireland and no other import routes for natural gas,” the minister has been warned. “In summary, natural gas use in Ireland is seeing increasing demand in the medium term, decreasing indigenous production and increasing dependence on imports from a single source.”

That UK single source happens to be bogged down in frustrating Brexit talks with the EU. Officials welcomed Brussels’ focus in the negotiations on “mechanisms to ensure as far as possible security of supply and efficient trade over interconnectors over different timeframes, taking account of the fact the United Kingdom will leave the internal market in energy”.

They did not say what they thought would happen if this failed.