Strong growth in the world economy has meant increasing demand for the fossil fuels that are necessary to sustain it, such as oil and gas. One consequence has been a soaring oil price, increasingly affected by geopolitical factors; namely, instability in some of the major regions of energy supply, the Middle East and the Russian Federation.
Minister for Energy Eamon Ryan, in setting out terms for a new oil and gas exploration licensing round in the Porcupine Basin, drew attention to that instability factor and he pointed to Ireland's vulnerability as an energy importer. Ireland now imports some 85 per cent of its gas supplies and natural gas is currently used to generate almost half of the country's electricity needs.
The hazard of dependence on gas supplies from distant and unreliable suppliers in less than stable states has been illustrated again in recent weeks. Russia's energy giant, Gazprom, has threatened to cut off gas supplies to Ukraine as part of a continuing financial row. Reductions in gas supplies to Kiev, however, could result in energy shortages in Europe as happened last year when a similar flare-up occurred. For the pipeline that carries Russian gas to Europe first passes through Ukraine. The European Union now estimates that half its gas imports come from Russia. And although Ireland mainly relies on imported gas from North Sea fields, as gas production declines there, Ireland becomes more vulnerable to supply disruptions in the Russian pipeline.
Nearly 40 years of oil exploration in waters off the Irish coast has produced a disappointing return in the shape of just four commercial gas finds. Of these, the Kinsale field in the early '70s and the Corrib field in the mid '90s have proved the most significant. So few major discoveries in so many years have made Ireland a less than compelling first choice for oil exploration activity, by comparison with the North Sea or Norway. However, the combination of a peak in global oil production, high energy prices, better exploration data and improved seismic technology may well have changed matters. At a time of unprecedented oil scarcity, Ireland's deeper - and less accessible - waters, represent a more attractive proposition for oil exploration companies. As well, the Department of Energy's own analysis of the potential of the offshore area on the west coast, the Atlantic margin, suggests possible oil or gas reserves of some €455 billion, sufficient if realised to meet Ireland's energy needs for 90 years. But whether the oil majors share the department's optimism may perhaps best be judged by how many accept Mr Ryan's new exploration terms and apply for licences in the new round by the December 18 deadline.