Three companies engaged in natural gas exploration in the Celtic Sea are set to join forces with two others in a new venture off the north-west coast.

Five companies yesterday announced that they planned to take a joint interest in an exploration frontier licence off the Donegal coast. Three of them - Island, Ramco and Petroceltic - are involved in different ventures in the Celtic Sea. The other pair in the Donegal venture are Lundin Exploration and Sunningdale Oils.

Lundin holds 35 per cent of the venture, Island has 26 per cent, Ramco 19.25 per cent, Petroceltic 16.25 per cent and Sunningdale has 3.5 per cent.

The licence area is 60 kilometres from a recent discovery in the north-west, and 70 kilometres from the newly completed 400 megawatt (mw) gas-fired power station at Coolkeeragh in Derry.

The most promising structure within the block is known as Inishbeg. According to statements issued yesterday by the companies, it has similar characteristics to the Corrib field being commercially developed.

The prospect is in 320 feet of water and the reservoir is estimated to be 5,000 feet below the surface. Under the terms of the deal between the five players, Island and Petroceltic will fund 40 per cent and 25 per cent respectively of the exploration drilling and testing costs and Island will receive its 26 per cent share in return. Island will also carry Ramco's and Sunningdale's share of the costs.

Irish-based Island was listed on London's Alternative Investment Market (AIM) last month, at which point it had close to €14 million in the bank. Mr Paul Griffith, Island chief executive, said that Inishbeg had an "attractive risk-reward ratio".

Lundin holds the licence and the companies are planning the first well for later this year.