Analysis: Before a ban on oil and gas extraction was introduced in 2021, 161 wells were drilled in Irish waters with four commercial gas discoveries, but none of oil
A question about reopening offshore oil exploration in Ireland is certainly timely in the context of the current oil crisis. Ireland is one of the most fossil fuel reliant societies in Europe, and it's important to understand the impact of possible indigenous oil production on prices and energy security.
To answer the question, though, we must look not just at offshore possibilities but first at our onshore refining capacity and how much fuel we need, and could produce. In Ireland, we need about 120,000 barrels of oil a day across transport, heating and industry. Crude oil in its natural state is relatively useless and must be refined into products such as petrol, diesel and kerosene so we can use it.
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From RTÉ Archives, John O'Donoghue reports for Summer Journal in 1977 on what it's like to work on an oil rig operating in the Atlantic Ocean 100 miles off the coast of Clare
Ireland’s only oil refinery is Whitegate, which can refine 75,000 barrels a day. But the fundamentals of oil refining mean that the volume of oil that is available doesn’t map directly to the volume of petrol and diesel we need. This is because only a certain percentage of a barrel of crude oil can be refined into petrol (about 20% of the barrel in Europe), diesel (about 40%) or kerosene (10%). The remaining 30% of the refined fuels, like fuel oil, which is a heavier form of diesel, are exported because we don’t have a market for them here.
This means Whitegate can cover most of Ireland’s petrol needs, but only 40% of our diesel needs and just 15% of our needs for home heating kerosene. These percentages hide the fact that diesel volumes are very high as diesel is the workhorse of the economy. The shortfall in product is made up by imports, mainly from the UK, through places like Dublin Port and other ports.
Having indigenous production of oil in Ireland would not increase the amount of diesel or petrol Ireland can produce itself, as it is limited by refinery capacity. It also does not necessarily mean it would reduce the price of petrol and diesel at the forecourt in a meaningful way.
From RTÉ News, fuel trucks regain access to Whitegate oil refinery after fuel blockade ends
Crude oil is sold internationally, not locally, and prices are determined at international hubs. Lower prices would only be achieved if the owner of an oil field was willing to forgo profit and sell oil below market price to the refinery. The Government could earn money by imposing higher royalties on possible offshore operations, but this would make projects less financially attractive to develop and would require a change in law.
In 2021, legislation was introduced banning oil and natural gas exploration and extraction. Before this ban, 161 wells were drilled in Irish offshore waters, resulting in four commercial gas discoveries and no commercial discoveries of oil. Compared to other prospective oil regions around the world, this is a very low success rate.
Ireland already has good physical oil security, but poor price security. We store significant volumes of oil on the island and have important refining capacity with diverse options for crude oil import. However, safe access to refined products from the ports and refinery is crucial for energy security.
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From RTÉ News, oil prices remain volatile due to uncertainty over access through the Strait of Hormuz
Offshore indigenous production would enhance our oil security if there was a disruption in shipping of crude oil to Whitegate (so long as the same disruption didn’t impact local oil production) but does not enhance our security for refined products.
Reopening licensing for the Barryroe oil prospect off the coast of Cork has been suggested to enhance Ireland’s energy security. While the site was never developed, one possible initial production scenario was suggested to produce about 20,000 barrels of oil per day. When refined, this would have supplied about 10–15% of Ireland’s fuel needs, replacing crude oil coming into the refinery from international locations with crude coming locally.
Ireland has poor oil price security because the oil price is set by global events, and the forecourt price is strongly influenced by taxation. Having offshore production of oil does not change this.
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From RTÉ Archives, Gareth O'Connor reports from the Shell offshore drilling rig on the Corrib gas field 80 miles off the coast of Mayo in 2007
However, the story with oil is not the same as natural gas. Unlike oil, we do not have storage of natural gas in Ireland, and we have low diversity of supply routes. All imported natural gas comes through undersea pipelines from the UK and the existing Corrib gas field is dwindling.
Ireland has a high reliance on natural gas for home heating, industrial use and electricity production and this reliance will remain high for at least the next decade. Any prolonged physical interruption in gas supply from the UK over the next number of years would be catastrophic.
Last month, the Government granted an extension to a company to extend exploration around the existing Corrib gas field. Indigenous gas production, especially in the vicinity of the existing gas field infrastructure, would enhance Ireland’s physical security of natural gas and should be consider and compared to other diversification options such as liquefied natural gas importation.
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The views expressed here are those of the author and do not represent or reflect the views of RTÉ
