The ‘new North Sea’ was the term coined to describe the influx of recent additions taking over control of the UK continental shelf from the oil majors.
And with it comes a new way of doing business, if one such minnow’s example is anything to go by.
Independent Oil and Gas (IOG) is working with contractors to defer start-up costs on its southern North Sea project until first gas.
This will allow the firm to get the Blythe and Vulcan Satellite hubs through to production start-up with “little to no equity” according to chief executive and interim chairman Mark Routh.
IOG described the move as “reflecting the new spirit of North Sea collaboration”.
Trade body Oil and Gas UK has been lamenting activity levels in the region in a number of recent reports.
So by giving contractors work – without having to stump up payment first – IOG hopes to stimulate activity without breaking the bank.
Helping the cause is IOG’s most recent estimates that the Vulcan hub alone will generate gross revenues in excess of £1billion over the course of its life.
The company yesterday submitted plans to the regulator for the development of the hub.
Mark Routh, chief executive and interim chairman of the company, said: “We’re doing it differently.
“The gross revenue from the field is going to exceed a £1billion. You can borrow a fair bit off that and you can get pre-payment for first gas.
“The banks are essentially a combination of the gas off take agreement and the service providers who are deferring costs until first gas, so we will pay them back off our income from production in 2019.
“That allows us to fund the development with little to no equity at all.”
The firm snapped up the stranded southern North Sea gas fields last year from Oyster Petroleum for a cut price deal worth $5million.
The acquisition was prompted after IOG identified the use of a decommissioned gas pipeline to evacuate gas from its Blythe development, 30 to 40 km to the west.
The firm launched a search to find other stranded assets in the area which could also benefit from the Thames pipeline coming back online.
IOG identified the Vulcan Satellites as a strong contender as the connected field is due for production shutdown next year.
A year of seismic reinterpretation, geophysical and dynamic reservoir modelling, development planning and optimal well design later and the field development plan has now been submitted to the Oil and Gas Authority.
The Vulcan Satellites FDP covers the three 100%-owned and operated Southern North Sea gas fields recently officially renamed as Southwark, Nailsworth and Elland.
The three fields are to be jointly developed with IOG’s Blythe hub, for which the field development plan was submitted in July 2017.
The firm has identified 2P reserves of 248 BCF (44 MMBOE) to be developed at the Vulcan Satellites alongside the Blythe Hub (Blythe and Elgood 2P reserves of 55 BCF), and subject to a successful appraisal well, the Harvey field to the south.
Gas from both hubs is planned to be exported via the recommissioned Thames Pipeline which IOG will also own 100%.
Mr Routh said: “Recommissioning the Thames pipeline was the way to go, so as soon as we decided on that strategy we looked at what else was stranded in the area.
“We went to the existing owners and said we can’t pay much but we can take these off your hands.
“It was a very compelling acquisition for us.
“We are targeting a final investment decision at the end of the first quarter next year.
“We are gradually ticking off the items on the to-do list.”
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