Scottish group Ramco Energy is expected to use a low-cost subsea development system tied into Marathon Petroleum's Kinsale Head gasfield to produce natural gas from the Seven Heads field off the coast of Cork. A spokesman for Ramco, which has a 56.5 per cent interest in Seven Heads, said there was an outline agreement on terms with Marathon and both firms were working on a legally binding agreement to allow Ramco produce Seven Heads gas through the Kinsale Head production system.

The spokesman declined to detail the size of Seven Heads, but it is understood the gasfield contains at least 350 billion cubic feet of gas, with some analysts suggesting that the structure may contain up to 500 billion cubic feet. There are no details on the life of the Seven Heads as this will depend on the flow rate Ramco can generate from the field.

But an agreement with Marathon means Ramco and its partners should be able to develop Seven Heads at low cost, as the gasfield is just 30 km south-west of the Kinsale Head platforms and the undersea pipeline to the shore at Ballycotton where the gas is linked to the Bord Gβis distribution network.

Engineering and design work has already been completed and this confirmed that Ramco had two feasible options for the development of Seven Heads - either using Kinsale Head or through a separate pipeline directly to shore.

The spokesman would not comment on what would happen once the Seven Heads flow comes ashore, apart from saying that the group was looking at options. But industry sources believe the most likely option is a sale of the gas to Bord Gβis, given the existence of an extensive distribution network.

It is understood that once Ramco signs a binding agreement with Marathon, a formal decision on the commerciality of the gasfield will be made. An application for a petroleum lease will then be made followed by the submission of a formal development plan to the Department of the Marine.

If these various hurdles are overcome, gas could flow ashore by the end of 2003, the Ramco spokesman said. If the Seven Heads project goes ahead, it will be timely as it will come on-stream as the Kinsale Head gas begins to run out. It is also likely to come on-stream ahead of the Corrib gasfield off the west coast, in which Marathon has an interest.