Island Oil and Gas said it has agreed with another Irish licence holder, Lansdowne Celtic Sea, on an option to farm into a licence 4/07 which brings an obligation to acquire seismic survey data and drill a farm-in well by July 2010 at the latest. If the option were exercised, Island would acquire 58.34% equity in the licence option area and become operator.
Licence 4/07 covers part blocks 49/11, 49/12, 49/13, 49/17 and 49/18.
Island’s well would aim to test an area just south of the same gas-bearing reservoir encountered by Island’s previous 49/23-1, 49/23-2 and 49/23-2z wells in the Old Head of Kinsale area.
“Island recognises additional low risk gas potential along the Old Head Trend in an area close to existing infrastructure at Kinsale,” said Paul Griffiths, chief executive of Island.
“Our studies in Old Head have significantly reduced exploration risk and have indicated that this part of the Celtic Sea Basin has the potential to contain material gas resources that, with synergies created by the development of infrastructure at Old Head, may lead to early development and increased near-term cash flow if successfully drilled.”
The Old Head of Kinsale field was discovered during drilling in 2006, and lies adjacent to the producing Kinsale Head field, operated by Marathon.
Island’s two partners, Valhalla Oil and Gas Limited and EnCore Oil plc, who have equity in Standard Exploration Licence 4/05 over the Old Head of Kinsale area, covering parts of blocks 49/17, 49/22 and 49/23, will be offered pro-rata shares in the option agreement with Lansdowne.
Island’s net interest in the option area would reduce to 37.92%, if Valhalla and EnCore choose to participate.
Island Oil and Gas yesterday reported the start of a 2D survey over standard licences 4/05 and 5/05 covering the Old Head of Kinsale and Schull gas prospects for which first production is targeted in 2010.