As a part of Ireland’s Irish Atlantic Margin licensing round Dublin headquartered Petrel was awarded two licence options over prospective acreage of the west coast of Ireland. The area spans 1,405 square kilometres.

A number of other AIM quoted explorers were also awarded licence options today with Providence Resources, San Leon Energy and Europa Oil and Gas all getting access to the newly opened up licences.

“This is excellent news,” said managing director David Horgan.

“The high hydrocarbon prices, fast-developing offshore technology and a proven hydrocarbon system means that Ireland's opportunity for offshore exploration has finally come.”

Hogan added: “There was considerable industry interest in the current round.  

“We are delighted to have been offered two blocks.  We have already started initial work and look forward to executing this exciting project.

“There will be discoveries in the Irish offshore."

Highlighting Ireland’s stance to encourage the development of a nascent oil and gas industry, Petrel explained that Ireland’s fiscal terms are competitive internationally.  

It emphasised that Ireland has a special Corporate Tax rate of 25 per cent applying to profits from petroleum production and an additional Profit Resource tax of between 5 and 15 per cent that applies to more profitable fields. 

Petrel also highlighted that Ireland is 58 per cent dependent on gas for electricity generation, and 95 per cent of that gas is imported. 

The nascent oil industry could be set for a significant boost in the coming months, as Providence Resources leads the way with an extensive drill programme. 

According to Providence chief executive Tony O’Reilly, the pivotal Barryroe well - which is scheduled to spud this month - could trigger a complete industry re-appraisal of the Irish offshore oil exploration.

Barryroe is not the only high impact prospect for Providence however. It will be just the first in a series of wells in the company’s ambitious work programme. This will represent the most significant and comprehensive drill campaign ever undertaken in the waters around the emerald Isle.

The US$2.5 million is for hitting certain milestones and follows a US$2 million payment in April. A third and final instalment of US$2.5 million will follow in six months.  

“The expected formation of an Iraqi government should clarify oil policy and enable Petrel to move forward with our Iraqi projects,” the company added in a statement to the stock exchange.

The group revealed in April that it had ended a 20-month stalemate with the authorities with a deal to complete the development on Subba & Luhais with local partner Makman. 

After that it will hold a 10 per cent interest in the project.

In its interim report that came out this morning, Petrel gave an overview of the political situation in Iraq, which still has no government following elections that took place in March and produced no emphatic winner.

Petrel said that this situation had serious implications on the development of the oil industry and that much would depend on the new oil minister.

According to Petrel, Iraq is capable of producing 9 million barrels of oil per day, while current production stands below 3 million barrels.

While reaffirming its firm focus on Iraq, Petrel has decided to diversify its operations by entering Ghana’s Tano Basin through the acquisition of a 30% interest in a petroleum agreement on Tano Block 2A.

Petrel noted that the basin has recently emerged as an exploration hot spot after the Kosmos/Tullow Oil (LON:TLW) joint venture alone making four discoveries including the giant Jubilee oilfield.

The block spans over 1,532 sq km (square kilometres) of what Petrel said was highly prospective acreage.

The Ghanaian National Petroleum Company (GNPC) has provided the company with available data, including 44 geological reports and extensive, good quality 2D seismic.

The agreement is expected to be ratified by cabinet and parliament in the coming months.

On the financial front, Petrel’s pre-tax losses decreased from €228,000 in H1 2009 to €171,000, while losses per share were reduced from 31 euro cents to 22 euro cents as operating costs shrank from €280,000 to €216,000.

Foreign exchange profit amounted to €44,000, slightly lower than €48,000 a year ago.

In its morning note, broker Astaire Securities said that the diversification into Ghana offered an “interesting exploration opportunity”.

“While Iraq remains a challenging environment with the government yet to properly form, the company has made some progress in removing substantial obstacles,” commented Astaire, referring to Petrel’s announcements that it has now resolved all outstanding issues with the Iraq Ministry of Oil, which were complicating and delaying completion of the Subba & Luhais contract.

The project has now been remobilised and both the project JV (joint venture) company and Petrel have received the cash owed.

Subba & Luhais is proceeding within an agreed 14 month completion schedule.

Petrel said that the remobilisation of Subba & Luhais marked the change in its focus in Iraq from development oil and gas fields under service contracts to exploration.

The company added that the upside in exploration will be higher than that available through developing oil and gas fields under service contracts.

“This is a satisfactory outcome for Petrel as it removes all obstacles to moving ahead with formalising our existing interests in Iraq in particular Western Desert Block 6 as well as possible future projects,” said chairman of Petrel Resources John Teeling.

Speaking about the decision to go back "to our roots” and diversify into Africa, Teeling noted that uncertainty in Iraq continued and the 11 years the company has spent in the country was a “long time to wait”.

“Since we entered Iraq in 1999 we have dealt with 5 governments, survived a war, faced down many threats and risks, all in pursuit of oil.

“Ghana will be a major force in world oil.  We are taking the opportunity to participate at an early stage,” said Teeling.

Back in July, Petrel opted not to proceed with the East Safawi Block in Jordan after failing to secure a farm-in partner for a billion barrel potential target with high exploration risk due to the impact of the financial crisis on risk taking.

In June 2009, Petrel said that since signing a US$197 million contract in 2005 and receiving US$20 million advance into a JV account from the Iraqi authorities, it had completed approximately 50 percent of the project work but had not received any payment yet.

It believes there is a solution to this problem, the group said today.  “We will continue to talk to the parties involved and to new parties who believe that they can broker a settlement.  In the meantime, development at Subba and Luhais is at a standstill, while nothing is happening on our other interests; Block 6 and Merjan.“

On a positive note, where progress is being made in Jordan, where protracted farm out discussions for the East Safawi block continue.   Petrel’s technical and geological analysis has been accepted by the potential partner.  The challenging capital market conditions of the past twelve months have made capital raising difficult for the partner. 

In Iraq, the company expects most issues that hamper normal business activities to clarify in the coming months.  Divisions among the policy-making parties probably require democratic endorsement in the upcoming elections in January. It remains unclear how these negotiations will play out.

In March a long standing institutional shareholder offered funding, and two other investors agreed to participate in the placing. A total of S$3 million was raised, and Petrel expects the money to keep it going to at least the end of 2010.

Chairman John Teeling commented: “The opportunity in Iraq is greater than ever.  Iraqi oil is low risk and low cost.  Reservoirs are large and infrastructure is extensive.  OPEC quotas are not a constraint.  Petrel is determined to stay in Iraq to participate in the growth.  We must resolve the current impasse and move on.  Efforts continue.”

Petrel said that since signing a US$197 million contract in 2005 and receiving US$20 million advance into a JV account from the Iraqi authorities, it has completed approximately 50 percent of the project work but has not received any payment yet.

Protracted discussions have been ongoing for sixteen months. Agreements have been reached, the latest in March 2009, where payments are promised but to no avail.  Petrel said it has proposed to the authorities that it is happy not to take payment in cash. Instead, it could take over operatorship of the field, complete the development itself, and take payment in the form of oil. This proposal is well received in certain circles, but the lack of a Hydrocarbon Law makes it difficult to implement, it said.

The group added it wishes to stay in Iraq as a principal rather than a contractor.

“The opportunity in Iraqi oil has not changed. Oil costs US$2 a barrel to produce. There are over 70 known fields waiting to be developed. It makes absolutely no sense that oil production in Iraq is falling to less than 2.4 million barrels a day when it can rise to 10 million barrels a day.  Iraq badly needs the revenue and the world needs the oil,” the group said.

Revenue for 2008 declined to €8.23 million in the year to December 31 2008 from €28.9 million in fiscal 2007, while pretax loss widened to €761,000 from €519,000 a year earlier.

“Apart from Iraq, we are active in Jordan on the East Safawi block. Intensive work done by Petrel in recent years has identified drillable targets. This is a 'frontier' area in terms of oil discoveries, so we prefer to joint venture the risk. Negotiations are ongoing with experienced Middle East corporate,” Petrel said.

In March of this year, a long standing institutional shareholder offered funding. Two other investors agreed to participate in the placing and US$3 million was raised at a price close to that prevailing in the market.  This money will keep Petrel going for the next eighteen months, it added.

The funds will be used as working capital to advance Petrel's projects in Iraqi oil exploration & development, and fully covers Petrel's existing and normally anticipated working capital requirements till end 2010.

After an extended period of consolidation which has seen oil production stagnate, the Iraqi oil sector is beginning to overcome its challenges. The regulatory framework is clarifying and it is hoped that there will soon be sufficient legal and constitutional certainty for major investments licensed by the sovereign, elected Iraqi Government under Iraqi law, the company said.

The security situation steadily improves and adequate supplier and logistical services are now available.

Petrel's managing director David Horgan commented: “As access and returns shrink elsewhere, Iraqi oil has never been more attractive. Put simply, Iraq offers the perfect package of the lowest exploration costs combined with the lowest production costs anywhere in the world. Iraqi structures are large, oil quality is excellent and exploration success are the best worldwide for massive structures of this type."