XCITE Energy Has said it is making progress with plans to develop a heavy oil field East of Shetland amid challenging conditions as the crude price hit fresh lows yesterday.
Brent crude fell around six per cent, $2.95 per barrel, to a six year low of $42.51 yesterday morning as concerns about the impact of the slowdown in China rattled traders, before recovering some ground.
The price of Brent crude has fallen by around 60 per cent from the $115 per barrel it reached in June last year.
It has fallen around 16 per cent this month reflecting concern that production is still running well ahead of demand.
The latest drop fall in the price will stoke concern about the outlook for the North Sea, where firms have slashed spending and shed around 5,500 jobs in recent months.
Announcing interim results, Aim-listed Xcite highlighted the challenges facing firms that want to win backing to develop new fields in the North Sea.
It noted oil and gas companies’ development budgets are under pressure, projects are getting deferred and an increasing number of North Sea assets are being put up for sale.
However, Surrey-based Xcite said a number of potential partners in the development of the Bentley oil field are conducting technical due diligence on the asset.
“Whilst management recognises that this appears to be a slow process, as a key element of any such diligence review, the Bentley reservoir requires extensive and iterative subsurface modelling and detailed analysis in order to fully understand the production mechanism and recovery from the field,” said Xcite.
In April Xcite noted specialists estimated Bentley contained 265 million barrels reserves on a proved and probable basis, up from 257m previously.
The company has not said when it expects to be able to submit a costed field development plan for Bentley with details of how it will be funded.
However, Xcite noted the costs of some services have fallen during the downturn.
“The current industry environment has freed up capacity in shipyards and we are actively pursuing and evaluating potential opportunities as a result of increasing competitiveness for major projects,” said Xcite.
The company said collaborative work completed with other firms has presented opportunities to achieve significant efficiencies and cost savings.
Xcite said work completed to date supports the estimate that it will cost $35 per barrel to build, operate and eventually decommission Bentley, which it reckoned represented a relatively low cost per barrel for a UK North Sea development.
The company lost $0.8m in the six months to June.
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