UK North Sea Oil & Gas Review – October 2019

Major oil and gas field developments, start-ups, exploration drilling, and corporate deals marked this past month’s activity in the UK North Sea.

Equinor and partners started on 16 September production from the Utgard gas and condensate field, spanning the Norwegian-UK border in the North Sea. Recoverable resources at Utgard are estimated at around 40 million barrels of oil equivalent (boe) and daily production on plateau is expected to be around 43 000 boe. The project was delivered ahead of schedule and 25 percent below the cost estimate. This is the first time Equinor has led a field development for recovering resources across the border between the Norwegian and UK continental shelves.

“The field was discovered in 1982 and a development has been considered several times. In 2016, Equinor acquired the UK share of the discovery to realise the development, which has become a profitable project even with substantially lower oil prices than we see today,” Equinor said in a statement.

MInteg, a subsidiary of EnerMech specialising in inspection and integrity, said on 17 September that it had been awarded its largest contract to date and would supply inspection services to a major oil and gas operator in the Southern North Sea. The scope of the work includes the inspection of infrastructure on five manned platforms and multiple unmanned satellite platforms, deploying MInteg staff trained in working-at-height and rope access techniques. The company expects to create up to 15 new posts in Great Yarmouth to service the five-year contract.

ASCO, a logistics and materials management provider has secured a five-year contract with Neptune Energy, under which ASCO will assume responsibility for Neptune’s shorebase logistics, marine, and materials management services for the North Sea. The contract fully begins this October.

“We take a collaborative approach with all our partners and service providers. We look forward to a successful and mutually beneficial working relationship with ASCO which will support the continued growth of our UK business,” Neptune’s UK Managing Director, Pete Jones, said.

Element Materials Technology said on 19 September that it had invested in two new mobile test rigs. Set up within ISO containers, the rigs can carry out weld fatigue testing of steel catenary risers either on-site or at its laboratories in Milan, Italy and Aberdeen, UK.

Chrysaor said in mid-September that it had applied to the Oil and Gas Authority to increase production from the Hawkins and Seymour fields 137 miles from the Aberdeenshire coastline.

On 30 September, Chrysaor announced that it had completed the acquisition of ConocoPhillips’ UK oil and gas business for US$2.675 billion, after it had received all necessary regulatory approvals. The assets acquired produced some 72,000 barrels of oil equivalent per day (boepd) in the first six months of 2019. The deal also adds two new operated hubs to Chrysaor’s portfolio in the UK Central North Sea - Britannia and J-Block – in addition to an interest in the Clair Field area.

“We are now one of the largest UK producers with a portfolio of high-quality, long-life assets complemented by a professional and expert staff,” Chrysaor’s chief executive Phil Kirk said.

“We have identified several exciting growth opportunities in our expanded portfolio and across the CNS,” Kirk added.

Independent Oil and Gas plc said on 23 September that the Harvey appraisal well was drilled in under two months and confirmed a 49ft gas column. Data acquired from the well is now undergoing analysis to generate a revised technical assessment of reservoir gas volumes and deliverability, meeting the primary objectives of the well.

On the same day, the Oil & Gas Technology Centre (OGTC) said that wave energy firm Mocean Energy, an Edinburgh start-up, had just set up a base in Aberdeen to commercialise their Seabase technology. Mocean is now looking for oil and gas partners to help bring their technology to power subsea equipment with ocean waves to market.

“Seabase is a wave energy machine small enough to fit in a shipping container yet robust enough to generate power in the harsh environment of the North Sea,” Mocean Energy Managing Director Cameron McNatt says.

Hurricane Energy plc said that the Warwick West well was spudded on 24 September using the Transocean Leader rig. Warwick West is the third and final well of the 2019 Greater Warwick Area drilling programme on Hurricane’s Lincoln and Warwick assets.

KCA Deutag’s unit RDS, a global provider of engineering and design solutions to the oil and gas, renewable and alternative energy sectors, said on 25 September that it had won a new contract to carry out a conceptual study for Pharis Energy.

Pharis Energy targets to launch the world’s first major offshore steam flood project and is currently exploring innovative ways to maximise oil recovery in the Pilot Field in the UK North Sea. RDS’s scope of work on this project will include Jack-Up screening and selection and the Well Head Platform design.

Craig International said on 25 September that it had secured £50 million worth of new contracts in the first half of 2019. Craig International has also won its first contract with Petrofac in the UK following a competitive tender process. Craig International has won major contracts with Spirit Energy and BP in recent months. The Petrofac contract will see Craig International provide third party procurement services and the supply of general oilfield products to support Petrofac’s offshore operations in the North Sea. The contract is for three years with an option to extend for another two years.

Global E&C, an integrated Engineering Procurement and Construction (EPC) contractor, said on 27 September that it had won Life-of-field Contract for Brownfield Services with Apache’s North Sea subsidiaries—the largest award in the history of Global E&C.

“The significance of this contract award cannot be underestimated. It signals a notable shift in how Apache has chosen to engage with the supply chain versus a more traditional contracting model and is a major statement in support of OGUK’s Vision 2035,” said Global E & C Managing Director Derek Mitchell.

Neptune Energy and its joint venture partners BP and JAPEX announced on 30 September they had awarded Valaris plc a contract to provide a heavy-duty jack-up drilling rig for the Seagull development oil project in the UK North Sea. Valaris will provide the Rowan Gorilla VI (VALARIS JU-248) to drill four firm wells for development in the Central North Sea. The 18-month drilling campaign is scheduled to begin in the third quarter of 2020. The Seagull development project, approved in March this year is expected to initially produce around 50,000 barrels of oil equivalent (boe) per day (80 percent oil) across its 10-year design life. Proved plus probable gross reserves are estimated at 50 million boe, the operator Neptune Energy says.

Zennor Petroleum Limited said on 30 September that that its 2019 Finlaggan subsea installation campaign utilising six separate vessels over the summer had been safely completed. The Finlaggan development project is targeting 30mmboe of gas condensate reserves from two subsea production wells tied back 20km to the Britannia platform. The project remains on schedule for first production in Q4 2020 as planned, says Zennor.

Delek Group’s Ithaca Energy has taken a decision, along with the other partners in the Isabella Oil Asset, to drill a first trial well in the area. The decision was based on recommendation from the project operator, Total E&P North Sea UK Ltd. Drilling is expected to begin on October 2019.

On 3 October, Shell said that Shell U.K. Ltd and its partner Ithaca Energy had taken a final investment decision on the Pierce Depressurisation Project in the UK Central North Sea. The investment will go towards modifying the existing floating production, support and offloading (FPSO) vessel, the Haewene Brim, which is owned and operated by Bluewater. The work also includes installing a sub-sea gas export line from the FPSO to the SEGAL pipeline, and the drilling of new wells.

“This important development of the Pierce field will allow us to unlock additional gas reserves for the UK’s homes and businesses, and value for our shareholders,” said Steve Phimister, Vice President Upstream and Director of Shell U.K. Ltd.

“It is Shell’s eighth final investment decision in the UK Continental Shelf since the start of 2018. Each is part of a careful and cost-effective strategic expansion of our North Sea capacity, inline with our core upstream focus on profitable investments and competitive growth opportunities,” Phimister added.

Approving the development, the OGA said, via Scott Robertson, Area Manager – Central North Sea at the OGA:

“This latest Pierce Gas de-pressurisation development secures approval of another component of the Central Graben Area Plan, developed by the OGA and industry collaborating to maximise economic recovery from this region of the North Sea.”

The work on the Pierce development will take place in 2020 and 2021. The field is expected to produce more than 30,000 barrels of oil equivalent per day at peak production, Shell said.

Commenting on the FID, Mike Tholen, Upstream Policy Director OGUK, said:

“This is good news and will help to meet more of the UK’s energy needs from domestic production.”

As part of the Pierce development project, Subsea 7 was awarded a siseable contract—of between US$50 million and US$150 million—by Shell for the engineering, procurement, construction, transportation and installation (EPCI and T&I) of a 30-km gas export pipeline, a gas export riser and associated subsea infrastructure, for tie-ins at the Haewene Brim FPSO.

ODE Asset Management said on 4 October it had been appointed as Installation Operator of the Tolmount Platform, a Normally Unattended Installation (NUI). The Tolmount platform is currently being built and first gas is planned for Q4 2020. The Humber Gathering System will initially deliver gas from the Tolmount field, owned by Premier Oil and Dana Petroleum, to the Easington onshore gas terminal.

i3 Energy plc said on 4 October that it had started drilling operations at Serenity with the spudding of the SA-01 appraisal well with the Borgland Dolphin semi-submersible drilling rig.

“We are excited to be drilling this potentially high-impact well at Serenity which could add materially to i3's reserves and resources and may become a fast-tracked development alongside the neighboring Tain oil field,” said Majid Shafiq, CEO of i3 Energy.

Jersey Oil & Gas announced on 8 October that Equinor had decided not to exercise the three-month option which Jersey had granted it over a 50-percent equity interest in Blocks 20/5a and 21/1a which contain the Buchan oil field and the J2 oil discovery.

“Equinor will continue its efforts to mature and assess the opportunities in the adjacent Equinor operated P.2170 (Verbier) license, working closely with JOG as part of the overall Greater Buchan Area Plan to maximise economic recovery in the area,” Jersey Oil & Gas said.

Flow measurement R&D specialist TÜV SÜD National Engineering Laboratory has launched its £16-million Advanced Multiphase Facility (AMF) in East Kilbride, aiming to help oil and gas operators to ensure that production remains economically viable.

Spirit Energy said on 11 October that together with its partner Dana Petroleum, it would drill a new well at the Chestnut field by Q1 2020, extending the field life by three years. More than a decade ago, Chestnut was initially expected to produce 7 million barrels of oil in just over two years, but Spirit and Dana have invested in development and have since exported more than 24 million barrels. The new well could keep the Chestnut field producing until 2023.

Commenting on the decision to extend the life of Chestnut, OGUK’s supply chain director, Matt Abraham, said:

“This continued commitment is a strong vote of confidence in the UKCS basin and demonstrates our supply chain expertise in extending the life of North Sea fields.”

Neptune Energy announced on 14 October that it had entered into a conditional sale and purchase agreement with Energean Oil and Gas to buy Edison E&P’s UK and Norwegian producing, development and exploration assets for US$250 million. The purchase is contingent on Energean completing its proposed acquisition of Edison E&P. If the deal is completed, Neptune Energy will boost its UK portfolio with a 25 percent working interest in the Glengorm gas condensate discovery in the UK’s Central North Sea, close to Neptune’s operated Seagull project, as well as with interests in the Scott, Telford, Tors, Wenlock, and Markham fields.