Providence Resources PLC said on Thursday it had discovered the first commercially viable oil well off the Irish coast, raising expectations that the cash-strapped country could become an oil producer.
Shares in Providence surged more than 17 per cent to £5.05 ($7.93 U.S.) following release of test results on its Ballyroe well, which suggest it could yield more than 3,500 barrels of oil per day, almost double previous estimates.
Tony O'Reilly Jr., Providence chief executive, told The Financial Times the Ballyroe well would hopefully put Ireland firmly on the oil and gas map and encourage further investment from the oil majors.
"This will be the catalyst that attracts more interest in Irish exploration, which is good for Ireland and good for Providence because we hold a lot of licences off the coast," he said.
The test results shows flow rates at Ballyroe, which is located 50 kilometres off the coast of Cork, at 3,514 barrels of oil per day, almost double the previous estimate of 1,800 barrels of oil per day. The oil is also higher quality than previous finds in Irish waters, which would make it easier to recover, said the firm.
Mr. O'Reilly said better recovery rates should enable the firm to upgrade its estimate for the total field size at Ballyroe, which currently stands at 60 million barrels recoverable.
Providence, which is listed in London and Dublin, took over as operators of the Ballyroe well in 2010. It owns an 80 per cent stake in the operation, with the remaining 20 per cent held by Lansdowne Oil & Gas. One of Ireland's most prominent business families, the O'Reillys, owns a 20 per cent stake in Providence.
The announcement by Providence was welcomed by Dublin, which is in the grip of an economic crisis that forced the government to accept an €67.5-billion ($88.28-billion) bailout from the European Union and International Monetary Fund.
Fergus O'Dowd, minister of state for natural resources, said they represented the first significant flows of oil on test anywhere offshore in Ireland in 12 years.
"The results of the Ballyroe well further demonstrate the hydrocarbon potential present offshore in Ireland," he said.
Ireland has had some success in developing commercial gas fields, notably the Kinsale Head gasfield. But it has not had any success in developing commercial oil wells despite several finds.
"What is significant about the Providence find is that it is light oil. Most of the discoveries made off Ireland's coast in the past have been heavy oil, which is more difficult to produce," said Gerry Hennigan, analyst with Dublin-based Goodbody Stockbrokers.
Ireland has an attractive fiscal regime to encourage oil and gas exploration off its coast. Corporate tax rates vary from 15 per cent to 40 per cent depending on the size of find. Some investment costs can also be written off against profits.