Exploration firm Providence Resources says 3D seismic studies carried out on a site at Spanish Point are likely to lead to commercial development.
The Spanish Point discovery, made by Phillips Petroleum in 1981, is located at a depth of 400 metres some 170 km off the west coast.
Providence said the most likely peak field production for the field would be 72,000 barrels of oil equivalent per day. The studies took some two years to complete.
It said it had already identified the primary appraisal well location and commenced well planning with a view to drilling in 2012.
"This is not only a significant event for Providence and its partners, but for the whole Irish offshore," Providence chief executive Tony O'Reilly said.
"The last two years work has significantly de-risked Spanish Point and as such, it gives us every confidence in the successful future appraisal and development of this tested discovery."
Providence operates the licence with Chrysaor E&P Ireland Limited and Sosina Exploration Limited.
