HURRICANE Energy has given the go ahead to plans to bring a giant find West of Shetland into production in a move that will boost hopes there could be a bonanza in the area.
The company confirmed yesterday it will proceed with a $500m (£375m) development on the Lancaster field which it expects to bring onstream in the first half of 2019.
Hurricane expects to pump 19,000 barrels per day from an early production system it thinks could pave the way to a much bigger development.
The announcement will be greeted with excitement in the North Sea, amid the deep downturn triggered by the sharp fall in crude prices since 2014. This has prompted firms to slash spending on new developments.
Lancaster is the first new field to win approval in the UK North Sea this year. Oil and gas firms approved 22 new projects in the North Sea in 2012.
Experts believe Hurricane’s work could trigger a surge of activity in a relatively under-explored area West of Shetland.
Hurricane has focused on so-called fractured basement areas contained in granite that lie beneath the sandstone targeted by most wells drilled to date.
While the outlook for the crude price remains uncertain, Surrey-based Hurricane is confident the economics of the Lancaster development stack up.
The company has drilled a series of wells that have increased confidence in estimates that the Lancaster licence may contain more than 500 million barrels oil.
It has been able to strike contracts with suppliers for the production infrastructure at a time when rates have fallen to what it has described as historically low levels.
Chief executive Robert Trice said key contractors were helping the company progress the development at pace.
“I am delighted that all operational work streams are proceeding on track for delivery of the project within the target timeline of first oil in 1H 2019,” he said.
Fiona Legate, senior UK analyst at Wood Mackenzie, said the fall in the cost of services in the North Sea and funds raised from City investors allowed Hurricane to act without waiting to get another industry player to back the project.
Asked about the significance of Hurricane’s decision, Ms Legate said: “We think it’s pretty positive for the North Sea as it’s such a mature region.”
The Lancaster development has the potential to help open up a new production hub off Shetland. There is limited production infrastructure in the area.
Ms Legate noted only 11 fields are in the running to win development approval in the UK North Sea in the next two years. These contain an average of around 30 million barrels oil equivalent.
The performance of the Lancaster early production system will be monitored closely by other firms.
Hurricane expects to recover around 60 million barrels oil from the initial development, from which it think it will generate good returns.
The company has said it will use information gathered through the EPS to help finalise plans for a full field development, targeting hundreds of millions of barrels.
Hurricane has made other finds off Shetland and has acreage in the area containing prospects.
It raised $530m debt and equity in June to fund the investment in the EPS and ongoing activity, although many investors have cooled on the exploration and production sector following the crude price fall.
Lancaster lies close to the Solan field which Premier Oil brought into production last year. EnQuest stoked interest in Shetland by bringing the giant Kraken heavy oil field onstream east of the islands in June.
Trained as a geologist, Mr Trice worked for Enterprise Oil and Shell before founding Hurricane in 2005.
Subject to regulatory approval, Hurricane will use a floating production storage and offloading vessel linked to subsea wells on Lancaster.
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