The Government needs to devote greater attention to facilitating the exploitation of the Republic's natural reserves, according to the chairman of oil and gas exploration company Providence Resources.

Addressing shareholders at the company's a.g.m., Dr Brian Hillery said international interest in Irish oil and gas reserves had risen greatly in recent years and said "much more needs to be done" to address this opportunity.

Providence, which is currently involved in reverse-takeover negotiations with Island Petroleum Developments, is in discussions with the Government on the company's non-compliance with the conditions of licences held in the Celtic Sea. Dr Hillery said the company "believes these discussions will reach a satisfactory outcome", possibly by integrating current conditions with the company's "holistic" approach to licensing. This "linking together" of various hydrocarbon discoveries would help Providence attract joint-venture partners for future projects, Dr Hillery said. The firm is already in agreement with British partner Midmar over a development in the Celtic Sea, which Providence believes could "contain a potentially large gas-bearing structure".

The proposed merger with Island, news of which first came to light in July, will give Providence access to the Seven Heads oil and gas development off the coast of Cork. Island currently owns a 12.5 per cent interest in Seven Heads, which is expected to produce gas for the first time in 2003. Providence shareholders will hold 40 per cent of the combined entity if the merger deal goes ahead, with three Island directors set to join the combined board.

Providence's major shareholder, Sir Anthony O'Reilly, owns 38.63 per cent of the company, or 51.5 per cent when the value of convertible bonds is considered.

Meanwhile, the Government has eased conditions on exploration firms operating in Ireland to compensate for difficulties caused by last year's foot-and-mouth crisis and the ongoing fall in funds available for base metal exploration. Mr John Browne, the Minister of State for the Department of Communications, Marine and Natural Resources, said he would waive the minimum expenditure limits needed to retain prospecting licences and cap expenditure requirements for the following two years.