Serica Energy’s boss has said the firm is “well equipped” to withstand the two-month shutdown of its main producing assets in the UK North Sea.
Yesterday the operator confirmed that the Bruce, Keith and Rhum (BKR) assets have stopped production after “deterioration” was found following an underwater inspection of a steel caisson.
BKR, acquired by Serica at the end of 2018, are the company’s flagship assets and their only UK operation aside from the Erskine field.
However chief executive Mitch Flegg described it as a “little setback” the firm is prepared to handle.
He said: “It’s an unwelcome setback but it’s not critical.
“We look at our performance last year and the fact that we built up cash equivalent of more than £100million in the company, we’re incredibly well equipped to withstand this little setback in the scheme of things.
“It’s a deferral rather than a loss of production so it will hit our cash flow over the next two months while we solve it.”
The structure in question is a seawater return caisson, a place to dispose of seawater which was used to cool equipment before it was put out of service in 2009.
A worker noticed movement within the caisson, which led to the Bruce platform and the Keith and Rhum fields which produce through it being shutdown.
A subsequent underwater inspection found the caisson had parted around 13metres below sea level.
Mr Flegg said there is “no credible risk” to health and safety and none of the 130 people on board have had to be down-manned, but the BKR fields will remain shutdown as a precaution.
Serica is in the process of putting contracts out for tender for the repair work and therefore hasn’t given an estimate on the costs, but Mr Flegg said it would be “very, very small” compared to the company’s overall cash position.
He added that a lot of the work will include the use of remotely operated vehicles (ROVs) and they will be looking to service companies to provide the required equipment and workers for the repairs expected to last two months.
That period is a “best estimate” at this point, with Serica planning to do “everything it can” to try to beat it.
However, the shutdown is “not the end of the world” according to Mr Flegg, as gas prices are down and Serica will not be bearing the full costs.
Under terms of its acquisitions of the BKR assets, there is a cashflow sharing mechanism between Serica and the sellers – Total, BP and BHP – which means they will pay for around 40%.
Mr Flegg added: “We keep 60% of the cash flow and give 40% to these partners which means they are effectively picking up 40% of the costs to solve this problem.
“So the downside is not as big for us as it otherwise would have been and we will still benefit from the oil and gas when it is eventually produced.
“We are 80% gas here so given that gas prices are relatively low at the moment it’s not the end of the world to not be producing for the next couple of months.
“It’s not what we want and I’m not trying to say it’s a good thing but all things being equal it’s not quite as bad as it might otherwise have been.”
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