Will Woodside Petroleum strike oil in the Porcupine Basin?

The news that Woodside Petroleum (ASX: WPL) has received the go ahead for its majority acquisition of two permits in Ireland’s Porcupine Basin is another positive note for shareholders. Woodside will acquire up to 85% in two licence options with new joint venture partner Petrel Resources for an undisclosed sum.

The next step for the joint venture is to apply for a Frontier Exploration Licence for the blocks and Woodside’s involvement in the joint venture is seen as an especially important development for future Irish oil and gas exploration.

Woodside has referred to the Porcupine Basin as an “emerging” oil and gas province undergoing increasing industry activity. So what is it about the region that leads Woodside halfway around the world? And why not focus on proven energy rich areas like PNG where the likes of Santos (ASX: STO) and Oil Search (ASX: OSH) have successfully ventured?

Major success in the Basin has so far been mixed. In September last year shares in Woodside’s new partner Petrel rocketed after it announced it had identified new prospective areas to target and its strategy to lure a major partner like Woodside.

“Petrel has identified encouraging targets… in both sets of our blocks.” The company release said. “Our objective is to develop targets that will attract large partners, to facilitate an early seismic campaign, followed by exploration wells.”

However Petrel’s success contrasts with that of energy giant ExxonMobil. In July this year the Irish Times website reported the company had plugged and abandoned a well in the Porcupine Basin after an unsuccessful exploration attempt found no commercially recoverable oil or gas.

According to the article, Exxon was drilling in a different block to those that Woodside is targeting, but the failure put an end to the company’s immediate plans for drilling in Irish waters. The upshot of Exxon’s attempt was the discovery of residual amounts of oil, which is a promising sign for a new wave of exploration, led by Woodside.

Foolish takeaway

Woodside is a smart company with a history of success. While there are no certainties with oil and gas exploration if the company has performed its due diligence investors can be confident Woodside will be proceeding with the knowledge that the odds of success are in its favour.

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Motley Fool contributor Regan Pearson does not own shares in any company mentioned.

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