Energy Voice Article: West of Shetland dream coming true for Siccar Point Energy

7 January 2019

Energy Voice Article 7th January 2019.

Witness the bold actions of Siccar Point and Hurricane Energy. They are playing a pivotal role in transforming what was a slow-paced, frustrating sector of the UK Continental Shelf (UKCS). The two firms, with their bold approaches, can redefine how west of Shetland is viewed as an oil province in its own right.

“Our west of Shetland position is the culmination of a number of years’ highly-focused effort,” Siccar Point chief executive Jonathan Roger said. “We had this business idea back in 2013 – putting a strategy together, raising finance, assembling a team and getting after North Sea deals. But I never dreamed we’d be able to build a business of the strength that we have achieved.”

Central to that was securing strong, highly-experienced financial sponsors at a time when the upstream oil and gas sector was plunging into a downturn – obviously, working with Graeme Sword at Blue Water and the Blackstone team.

“They knew exactly what they were getting into and saw the strategic value of planning for the long-term. What this allowed us to do was take a measured approach. Because of the state of the oil market, companies and investors in the North Sea were looking to reduce capital outlays and cut asset portfolios. As a result we were able to pick up a high-quality set of assets.”

Siccar Point has been able to assemble one of the largest portfolios of discovered, undeveloped assets in the UKCS with production out to the 2040s, no decommissioning issues or costs hanging overhead, exciting exploration prospects and smart partnerships. West of Shetland, Schiehallion is Siccar’s main producing asset. Redeveloped as the centrepiece of the BP-operated Quad 204 project, it is a core part of the company’s production with significantly more upside to come. Following redevelopment, the field has been onstream since mid-2017, and there is an ongoing infill drilling programme with every well coming in above expectations.

Siccar Point was lucky to secure a stake in Schiehallion through its acquisition of OMV’s UK assets in late 2016.

Mr Roger said: “There remains huge running room with the asset. This wasn’t about buying a field in decline. It is one where there will be production drilling for many years yet.”

“The plan is to keep on filling that hopper. The rig is about to move to the Loyal field (within Quad 204) and is scheduled to return to Schiehallion in 12 months or so for another two years of drilling. There are lots more targets for it to go after and production is expected to continue into the 2040s.”

Schiehallion is delivering good cash flow and the Equinor-operated Mariner field – in which Siccar holds a stake – is set to pump income up further when it comes onstream, possibly in the first quarter.

“Through the combination of the financial capacity that we already have, coupled with good revenues coming in, we’ve got enough to push ahead with the business, including developing the Cambo field,” Mr Roger said.

“I believe we have a most exciting growth profile. It’s not just Schiehallion and Mariner – there are also Cambo and Rosebank in the prospective development pipeline, plus exploration of the Blackrock and Lyon prospects.”

Between its interests in Schiehallion, Mariner, Cambo and Rosebank, Siccar Point should achieve around 50-60,000 barrels per day (bpd) equity production from these fields alone over the coming years. BP operates Schiehallion, while Equinor leads Mariner and will take over Rosebank once it acquires Chevron’s stake. Cambo is Siccar Point’s responsibility and that’s a huge commitment, given that this will ultimately cost billions to develop. The key focus for the final appraisal well – drilled last year – was the northern part of the field.

“We carried out a very successful well test with petrophysical properties coming in above expectation,” Mr Roger said. The well test was conducted over 10 days and was very stable – all dry oil without any water breaking through. The pressure build-up was fabulous on the back of it too.”

“As well as the pressure data, ‘Cats’ wireless well-monitoring gauges were installed downhole which have transmitted further data – another six weeks of pressure build up, with the reservoir more or less returning to its virgin pressure. This indicates contact with a very large volume of hydrocarbons.”

“We’re certainly looking at reserves of more than 800 million barrels of oil in place.”

“The recovery rate estimate currently looks to be around 30-35%.”

The plan for Cambo is to develop it in phases using a floating production system.

Any notion of a tieback to Rosebank has been kicked into the long grass.

Cambo is big enough to stand on its own, and will likely come onstream before Rosebank.

Mr Roger said: “We’re going through the Cambo FPSO selection process just now. While produced oil will be shuttled, gas evacuation will be by pipeline tied into existing infrastructure. Near-term options are gas reinjection and flaring subject to regulatory approval.

“There is enough gas at Cambo to necessitate a long-term solution and the export line option is seen as an opportunity to tie-in gas from other as yet undeveloped and to be found discoveries in the area.

“We’re now the operator of the Suilven and Tornado discoveries. Together they hold about 500 billion cubic feet of gas and represent a valuable future development opportunity by tying in to such a pipeline.

“We’re looking to sanction Cambo towards the end of this year. That includes going through the FPSO process and front-end engineering and design.”

New-build and redeployment options are on the table. Whichever FPSO route is taken, the vessel will need to have a storage capacity of 600,000 to 1m barrels of oil.

Mr Roger said: “Phase one of Cambo will target more than 100m barrels with further phases to follow. This is more sensible than trying to do everything in one go. We’re probably looking to design production facilities with a capacity of 50-60,000 bpd capacity.

“First production depends on the FPSO option selected. Modifying an existing vessel will be quicker than a new-build.

“Based on achieving sanction at the end of this year, we’re probably looking at 2022 for first oil.”

Cambo is expected to become a production hub, as it is surrounded by considerable potential reserves in the Corona Ridge.

This is a geological high with Cambo located to the south and Rosebank to the north with multiple different proven plays.

Mr Roger said: “Corona is a huge structural high and we’re estimating that, in addition to the discovered resources at Cambo and Rosebank, there are more than 1.5bn barrels of exploration potential in our acreage alone.

“All the 3D seismic shots over time have been reprocessed between the various partners including ourselves.

“The first well we’re planning to drill is Blackrock, a multiple sands prospect where we’re currently looking at more than 200m barrels.

“Success with Blackrock would help us de-risk a number of the other targets that have been identified.”

Diamond Drilling’s Ocean Great White is due on location in time to spud the Blackrock exploration well in March.

If the result is good, Siccar will swiftly carry out appraisal work.

An exploration well at Lyon – majority-owned by Ineos – was deferred from 2018 to this year.

Lyon is thought to harbour 1-3 trillion cubic feet of recoverable gas. It could be large enough to form a new hub similar to Total’s Laggan-Tormore fields.

The nearby Tobermory, Bunnehaven and Cragganmore assets would all be suitable tie-back candidates.

Mr Roger said: “It is Lyon which we believe will unlock that whole northern area. It will be drilled back-to-back with Blackrock by Ocean Great White.”

Siccar’s not on its own in the quest to develop Cambo and drill the likes of Blackrock. In March last year, Shell bought a minority interest in the Greater Cambo Area.

“We’re working very closely with them,” he said. “They came in as a 30% non-operator and they clearly see the area’s potential. The Siccar and Shell teams involved with Blackrock and Cambo are working together extremely well. Shell knows we want to move forward with pace. Under the leadership of Steve Phimister, Shell has developed a new way of working. They’re keen to drive forward too.

“Shell brings huge experience to the table. They’re a very active and aligned partner. One of the things that they’ve been very keen on is understanding how we operate – to learn from us as well. And we’re keen to learn from them.”

Staying with Cambo, another area of keen interest to Mr Roger is what is called the Nave Basement High, which lies to the south of the field and which he is keen to work up into an exploration area.

“We’ve got some big targets there, though they’re probably more gas-driven, plus there is big basement potential,” he said.

Siccar Point also has its Rosebank commitment comprising a 20% non-operated interest acquired via the OMV UK purchase.

With Equinor preparing to come back to the Rosebank table after an absence of several years, Mr Roger is looking forward to acceleration of the much-stalled development.

He said. “With Equinor coming in I think we can look forward to the original development plan being improved significantly, though Chevron had taken the costs down hugely compared to what they were back in 2012.

“That’s a real positive to us, though clearly it will take a while for Equinor to settle in and get things moving.

“Besides the main field development plan, Rosebank offers considerable follow-on potential too. The target is 300m barrels but around 500m have been discovered.

“The external view of Rosebank is not as positive as the internal picture. If those on the outside could see what we can they would be encouraged. It’s going to get a lot better with Equinor in charge.”

Equinor seems like the ideal operator for Rosebank.

Mr Roger said: “Clearly, Equinor will have much more to say once its feet are under the table – the quicker the better as far as we’re concerned. We’re keen to take the asset forward in a partnership.”

Siccar Point is a young company, but one that has made astonishing progress and is maturing well. So does Mr Roger sometimes pinch himself?

He said: “We just get on with the job and only occasionally step back and compare what the company looks like today to its beginnings. Even more exciting is what lies ahead of us.”

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