Wednesday, 28 October 2015

Is the Serica deal a sign of improved North Sea co-operation?

by Elaine Reynolds

A recent transfer of equity in a Central North Sea block may herald the beginnings of a new period of cooperation in the UK North Sea that would encourage undeveloped assets to be brought onstream. Serica Energy (WI 50%), together with partners Endeavour (25%) and EOG (25%), looks set to pick up 100% of the Columbus field, mainly located in Block 23/16f. Columbus extends to the south into the 23/21a block, where partners BG and SSE have agreed to transfer their equity in the part of the block covering Columbus for a nominal sum. 

Columbus field location map

Columbus was discovered in 2006 and fully appraised by 2008, but Serica has to date been unable to finalise plans to develop the field via the BG operated Lomond platform, located 8km from Columbus. The 15.5mmboe field is a typical example of the kind of stranded asset that has struggled to be developed in the North Sea; a small accumulation operated by an independent, close to ageing infrastructure operated by a major, and with each holding separate commercial concerns.

However, the Wood Report, published in 2014 and charged with identifying ways to maximise recovery from the UKCS, has highlighted the need for a fundamental shift in commercial behaviours between operators in order to benefit UK plc. Serica could be one of the early beneficiaries of this change in approach.

Serica's deal should help to push the development of Columbus forward as it removes the need for unitisation discussions; however infrastructure access still needs to be agreed. Lomond provides production facilities for the Erskine field in which Serica has held an 18% stake since 2014, strengthening its position in negotiations with BG.  Although the platform is ageing, a recent shutdown for major infrastructure improvements appears to have significantly improved performance since Erskine production restarted at the end of May this year. If sustainable, this would provide confidence that  the platform life can be extended. 

The equity transfer points to a more pragmatic and constructive approach to commercial deals in the region. The Wood Report, together with the prevailing low oil price, appears to be concentrating minds to focus on inefficiencies and applying pressure to perform. In addition, the regulatory body set up this year to implement the Wood Report's recommendations, the Oil and Gas Authority (OGA), is now expected to be involved in facilitating a commercial agreement for Columbus, along similar lines to that already employed by NPD in tariff negotiations in Norway. If successful, this could point the way for others to progress the development of further stranded assets on the UKCS. 

No comments :

Post a Comment