Terry Dallas, Arco's finance director, said one of the first moves the company would make if it acquired Aran would be to carry out a $3m seismic survey on the Connemara blocks off Ireland's west coast. If tests were positive Arco would move on to a drilling programme, likely to cost $15m.
Aran owns the Connemara field, which it believes could contain 80 million barrels of oil. BP, which was originally involved, drilled five wells in the earlyEighties and struck oil in three of them. However, the technical problems of exploiting a field in water 1,000ft deep persuaded BP that the field was not economic, and it withdrew in1989.
Mr Dallas said that new surveying and drilling techniques, some developed for the deep waters west of Shetland, would increase the chances of producing oil successfully off Ireland. "We think Connemara is quite interesting," he said. "It's a technically a high-risk play, but it looks good to us."
The first stage will be to see how fractured the field is. If it is divided into a number of different pockets, it will be more expensive to extract the oil. However, the development of ships that double as oil platforms, which can be easily moved from one site to another, could overcome this difficulty.
Aran has said it is in the process of developing the Connemara field, but Arco says its superior technology and deeper pockets mean it is more likely to bring the oil ashore. However, in its offer document posted to Aran shareholders on Friday, it warned that "considerable appraisal work still needs to be done before commerciality can be determined".
Arco also highlighted the risks associated with the BP-operated Schiehallion field some 150km west of Shetland, where Aran has a 17.65 per cent stake. Widely seen as the jewel in Aran's crown, Schiehallion was the subject of a positive well test last week just hours after Arco launched its surprise takeover bid.
In response, Aran argued that "such discounting of risk may explain the low level of Arco's offer", and urged investors to take no action. The stock market, for now, seems to agree. Shares in Aran closed at 66.5p on Friday, comfortably above Arco's 61.5p per share offer.Reuse content