NORTH Sea-focused Independent Oil and Gas (IOG) is on track to start production from a landmark development after making progress amid challenging conditions.
Shares in IOG rose five per cent yesterday after the company said it expects to begin pumping gas from its first development in the third quarter of this year.
The start-up date is in line with the target set in October 2019 when IOG decided to go ahead with the scheme. This involves bringing finds that have lain undeveloped for years into production.
It made the decision to proceed after winning backing for the project from US billionaire Warren Buffett. This was a notable coup for a firm that is a relative minnow in an industry dominated by giants.
READ MORE: Famed 'Sage of Omaha' plans to develop North Sea gas fields
Chief executive Andrew Hockey has said Independent’s share of the cash surplus generated from the development could be worth more than £500m.
However, the company has faced big complications since making the investment decision amid the turmoil in the industry triggered by the coronavirus crisis.
Oil and gas prices plunged last year after the imposition of lockdowns around the world hit demand.
Social distancing requirements have made it hard for firms to complete work offshore.
IOG’s project involves drilling wells and installing production facilities offshore and refurbishing a pipeline that had fallen into disuse, along with related onshore facilities.
The company said yesterday that it had started drilling the first of five development wells on the Southern North Sea fields included in the first phase of the project.
READ MORE: Appeal of North Sea underlined by boss of UK's biggest oil independent
Mr Hockey said the start of drilling was a key milestone. He said the progress achieved reflected effective collaboration between the company and Mr Buffett’s CalEnergy Resources and between the two partners and supply chain players.
“This drilling campaign has been planned meticulously by the IOG drilling, subsurface, subsea and HSE teams since early last year, in collaboration with our main drilling contractors Noble Corporation, Petrofac and Schlumberger and our partner CalEnergy,” said Mr Hockey.
“We have a very clear collective focus on ensuring safe and efficient performance leading successfully to First Gas in Q3 2021.”
READ MORE: Independent Oil and Gas snubs takeover approach
Mr Hockey has said IOG could use the earnings from its first development to fund growth. This could involve the firm developing other finds. Acquisitions are on the agenda.
CalEnergy Resources paid £40m in return for a 50% stake in the project and agreed to cover £60m of the first phase development costs.
Shares in London-based IOG closed up 1p at 21.5p, leaving it with a stock market capitalisation of around £105m.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here