Drilling of Serica North Eigg exploration well hit by £3m, six-week delay

Drilling operations on the North Eigg exploration well have been hit by delays, Serica Energy (LON: SQZ) has confirmed.

A recent equipment mishap has forced the North Sea operator to temporarily halt work, pushing back the project timeline by around six weeks.

Drilling at North Eigg – which could hold prospective resources of 60 million barrels of oil equivalent – kicked off in July using the Transocean Paul B. Loyd Jr. harsh environment semi-submersible rig.

In recent weeks operations had been progressing successfully, Serica said, despite some drilling delays in the top-hole sections.

But during preparations to spud the third section of the Northern North Sea well, a vital piece of rig equipment failed during a routine test.

A replacement has been sourced and planning is underway to transport this to the drilling rig.

The oil and gas company insists this will have “no impact on the ultimate geological outcome of the well”.

Moreover it is expected that all outlays incurred will benefit from the investment allowances available under the recently introduced energy profits levy.

The net well cost for the company, after tax, is anticipated to increase by around £3 million as a result of the delays.

It is now expected that results from the well will be available in December, rather than mid-October as originally planned.

Mitch Flegg, chief executive of Serica, said: “This high-impact exploration well is the latest in a series of capital investment projects undertaken by Serica with the objective of increasing our production in an environmentally sensitive manner. This programme is designed to help increase the UK’s security of supply and reduce its reliance on imports.

“The technical delays encountered on this project are extremely frustrating but do not impact either the chance of success or the significant prospective volumes of this exploration prospect.”

Serica operates the North Eigg exploration well, located in block 3/24c, with a 100% interest.

If results are as hoped, it is anticipated that the gas reservoir will be capable of providing energy to the UK domestic market for a decade from 2025.

But earlier this year Mr Flegg played down the chances of success at the exploration well.

It is anticipated that a discovery at North Eigg would be developed utilising the company’s nearby 98% owned and operated infrastructure on the Bruce platform.