The north-west received a boost yesterday when Statoil announced an off-shore oil and gas exploration project worth about €2 million to the local economy.

Drilling at the Cong Prospect on the Slyne Basin, 32 nautical miles north-west of Mayo, begins in late July and continues for two months.

A major beneficiary of the €17 million programme will be Killybegs, Co Donegal, expected to provide back-up services for the Statoil rig and its 90-strong crew.

The project will inject €2 million into Killybeg's maritime support sector, according to industry sources. The Government hailed the move as an important step towards reducing the Republic's reliance on energy imports.

"Ireland's almost total dependency on imports for its energy requirements, coupled with its associated security of supply implications, highlights the need to increase the share of energy supply produced from indigenous resources," said Mr John Browne, Minister of State at the Department of Communications, Marine and Natural Resources.

But Mr John Conroy, general manager, Statoil Exploration Ireland, cautioned against raising expectations. He said: "We are hopeful for a positive result from the Cong Prospect this summer. However, as always, drilling is the ultimate test.

"Although we have carried out seismic studies and other tests in the past few years, and we have the capability and worldwide experience of Statoil and our partners behind us, experience tells us we need to be cautious in our outlook because drilling offshore Ireland remains an outside bet in terms of discovering a significant commercial find," he added.

The Irish Offshore Operators' Association said the Statoil project raised the number of coastal drilling programmes to a 25-year high.

Statoil's last venture off the Irish coast was in the Porcupine Basin in 2001. But drilling was cancelled when no trace of gas or oil was found.