The minority partner in the Barryroe oil project off the Cork coast is planning to pursue an international legal case against the Republic for at least $100 million (€92.5 million) after Minister for the Environment Eamon Ryan pulled the plug on the oil and gas prospect off the Cork coast.
UK-registered Lansdowne Oil & Gas, which has a 20 per cent stake in the Barryroe field, highlighted the route it plans to take on Monday after the Minister decided on Friday not to grant a so-called lease undertaking to continue work on the project, 50km off the coast of Cork. An application on the matter had been with Mr Ryan’s department for more than two years.
Dublin-based Barryroe Offshore Energy, the lead on the project with an 80 per cent stake, is weighing options with solicitors in A&L Goodbody, understood to include the possibility of pursuing a judicial review through the High Court to try and quash the decision.
The firm held discussions with its main shareholder and financial backstop provider on the Barryroe project, Larry Goodman’s Vevan Unlimited company, on Monday afternoon on options.
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However, as a domestic company, Barryroe does not have the recourse Lansdowne has to international arbitration under the so-called Energy Charter Treaty, to which the Republic and UK are signatories.
Shares in Barryroe plunged 49 per cent on Monday to a record low of 0.95 pence, to give the company a market value of £21.2 million, while Lansdowne’s market cap slid 53 per cent to £4.2 million.
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Lansdowne estimates the net present value of its stake in the first development phase is worth $104 million. That is based on estimates of 278 million barrels of oil in place in an initial reservoir and an oil price of $68 a barrel in 2027. It is also estimated to have “significant gas resource [that] could make a vitally important contribution to Ireland’s energy mix as it transitions to a zero net carbon economy”, Lansdowne said.
The first formal step would involve Lansdowne notifying the Irish Ambassador to the UK Martin Fraser and President Michael D Higgins, as head of State, of its intention to pursue arbitration.
While granting a permit for further work on Barryroe would have been seen as problematic for Mr Ryan, as the leader of the Green Party, his department insisted that the “broader policy issues relating to, for example, the phasing out of fossil fuels or our security of energy supply, did not form part of the assessment process”.
Barryroe secured a €40 million funding backstop from Vevan, which owns about 16 per cent of the company, last November to cover the full cost of a certain work, including the drilling of an appraisal well, after Mr Ryan’s department raised concerns about the explorer’s financial capacity to progress the field. Other major shareholders in Barryroe, including businessman Nick Furlong and his Pageant Holdings vehicle, subsequently agreed to participate in the backstop, which was by way of loan notes that are convertible into shares.
Barryroe was also planning to raise €20 million via a share sale, open to investors who did not participate in the convertible loan-note fundraising.
However, the Department of the Environment told Barryroe in a letter on Friday that the Minister’s decision was based on the applicant not meeting its “investment cover criterion” in guidelines for offshore oil and gas exploration applications. The guidelines, issued in 2019, say licence applicants should have net tangible assets of 3½ times the cost of planned work.
That suggests that the applicants need net tangible assets of €140 million — a multiple of their existing position. Most of Barryroe’s €69.3 million of reported assets at the end of 2021 was made up of intangible assets that would have to be deducted. Almost all of Lansdowne’s £16.3 million assets were intangible.
It is likely Lansdowne will base its case on the fact that it invested in the Barryroe licence well before the 2019 guidelines were introduced. The guidelines also make clear that the department “may, at its absolute discretion, elect to depart from the approach set out”.
Colin Grant, an analyst with Davy, said that “no small oil and gas explorer could ever” raise 3½ times what’s needed to fund a phase of a project.
