PwC Ireland has launched its 2019 Irish Oil and Gas Survey. It reveals a sector less confident about the future at a time when technology and climate change are priorities.
The survey, launched in tandem with the Atlantic Ireland petroleum conference hosted by the Irish Shelf Petroleum Study Group (ISPS), was carried out during the autumn of 2019 amongst the key players in the Irish Oil and Gas industry, including foreign and Irish headquartered entities carrying out petroleum production, exploration and services activities.
Key findings include:
Ronan MacNioclais, lead partner of PwC's Ireland Oil and Gas practice, said: “With a more uncertain global economic outlook, it is not surprising that we have seen low levels of Irish exploration and drilling activity in the last year. This sentiment is reflected in the survey with the majority of respondents feeling substantially less confident about the outlook for the Irish oil and gas industry compared to last year. However, participants are upbeat about the levels of petroleum yet to be discovered in Irish waters and expect to continue exploration activities.
“Government’s recent announcement on plans to phase out oil exploration in Irish waters has caused major concern and uncertainty in the industry, though it was noted that exploration for natural gas would continue. Natural gas has a valuable role to play as a transitional fuel while low-carbon alternatives are developed, but it is clear that Government needs to take steps to reassure the industry. It is acknowledged that as a nation we need to transition to low carbon fuels as well as renewables but this will take time. Ireland, along with other economies, will need to continue to place heavy reliance on oil and gas for many years to come until consistent supplies of alternative sources of energy reach acceptable levels. Ireland is still regarded as a high risk location for exploration activities due to the lack of commercial discoveries. To ban drilling for oil seems like a risky approach as it makes Ireland dependant upon continued supplies from other countries, particularly at a time of geopolitical uncertainty, and it would do little to reduce our carbon footprint.
The complexity of the planning (20%) and regulatory regime (26%) was reported as the greatest challenge in undertaking activities in oil and gas in Ireland. 69% of respondents rated their experience of the Irish licensing authority as ‘poor’ or ‘very poor’.
The top three Government priorities, according to the survey, should be streamlining the regulatory and planning processes (28%), promoting the benefits of Irish oil and gas exploration to Irish communities (20%) and creating further acreage and licensing opportunities (18%).
The survey shows that oil prices are still expected to be well short of the record levels of $147 per barrel last seen in mid-2008. 61% of participants said that the minimum level of petroleum price necessary to have a progressive and sustainable Irish petroleum industry is $50-$70 per barrel (2018: 66%). At the same time, the majority (69%) believe that petroleum prices will continue to increase in the next two years of which 15% believe this increase will be more than 20% (2018:9%).
The top drivers of oil and gas prices, according to respondents, are: global economic outlook (32%); demand and supply (26%) and the levels of shale petroleum production (16%).
Stephen Ruane, Partner, PwC Ireland Oil and Gas Practice, said: “There is some work to do to make Ireland’s planning and regulatory regime easier to navigate. Respondents felt that Ireland’s regulatory regime is too complex. Many suggested that the regulatory process should be more streamlined calling for the increased resourcing of the Petroleum Affairs Division. The complexity of the oil and gas regulatory and planning regime is turning off potential investors and damaging our ability to compete internationally.”
Nearly half (45%) of respondents said that technology would have a significant impact in reducing the risk profile of their activities in the next 3 years.
Similar to other industries, the environment and climate change is high on the agenda. We see major players diversifying into renewables and making efforts to reduce their carbon footprints. Two-thirds (66%) reported that climate change is having a major or significant impact on their investment activities and business operations.
Ronan MacNioclais concluded: “The industry has a huge opportunity to fully reap the opportunities from technology including embedding data analytics and automation. Those who do this quickly and efficiently will be get ahead of their competitors.”
At PwC, our purpose is to build trust in society and solve important problems. We're a network of firms in 157 countries with over 276,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at pwc.com.
PwC refers to the PwC network or one or more of its member firms or both, each of which is a separate legal entity. Please see pwc.com/structure for further details.
© 2020 PwC. All rights reserved.