Crazy? Or is bust Ireland about to strike black gold?

Deep-water reserves off the Irish coast could reduce Dublin's budget deficit, reports Mark Leftly

Oisin Fanning laughs when asked how the Porcupine Basin, an ocean bed off the south-west coast of Ireland that bears little resemblance to the sharp quilled rodent, got its name. "I don't know, they seem to pluck these names out of thin air."

The executive chairman of oil explorer San Leon clearly hasn't read volume 48 of The Merchants' Magazine and Commercial Review from 1863, which details how a 380-tonne paddle steamer called the HMS Porcupine discovered the bank of coarse gravel after leaving Galway the previous year.

On the 150th anniversary of that find, the Porcupine Basin is suddenly of huge importance to the Irish economy. Beneath it, so Mr Fanning believes, lie billions of barrels of oil that could help transform a badly struggling economy that imports every single drop of the black gold and most molecules of gas it consumes.

"Ireland is like the North Sea 40 years ago," he argues. "And it is part of the North Sea, really – it's the same rock, so there's bound to be some good prospects there."

The problem has always been money. Mr Fanning says it is difficult for executives with wildcat instincts at major oil companies to persuade their boards to risk their dough on a new frontier, particularly a country whose most high-profile find, the Corrib gas field, is not expected to start producing until late 2014. That's many, many years behind schedule – Corrib was discovered in 1996.

As one Irish government official tells The Independent on Sunday: "We've only drilled 157 wells in the past 40-odd years and had four proven discoveries. In the UK and Norway there have been thousands and they have discovered plenty. If there is an energy crisis or a strike at one of our supplier nations we would be in serious trouble."

However, last week there was something of a breakthrough when supermajor ExxonMobil signed an agreement to hire an Eirik Raude rig, which drills to water depths of 10,000ft, for six months next year to cut into five blocks in the South Porcupine. At an estimated cost of $650,000 (£400,000) a day, that's a significant investment for an oil group often noted for its caution.

Exxon owns the licence to prospect in what is known as the Dunquin area with fellow heavyweights ENI, of Italy, and Repsol, from Spain. A fourth partner called Providence Resources, a Dublin-based group that was the first into Dunquin, is the brainchild of Sir Anthony O'Reilly, who for years owned this newspaper and its daily title before selling up in 2009.

His son, Tony O'Reilly, is Providence's chief executive. He says: "Some people say we're crazy when we tell them there are billions of barrels here, but the same people said that about the North Sea."

Providence certainly raised some eyebrows in July among investors in both Dublin and London, the cities in which it is listed, when it announced that there could be as much as 1.6bn barrels of oil at its Barryroe find, some 50km off the Cork coast. Mr O'Reilly believes that 20-something per cent of that oil might be recoverable, which is below the industry average of 38.5 per cent, but represents an awful lot of money when every barrel is worth nearly $100.

The government would make 25 to 40 per cent in taxes on these vast profits. If other areas that weren't technically possible to commercialise when they were discovered in Ireland's half-hearted push in the 1980s also start producing, such as Spanish Point, some 175km offshore, then Ireland's ¤18bn (£15bn) budget deficit would almost disappear.