Serica Hoisting Sails for Columbus
Tuesday 10 January 2017
Serica Energy is looking to firm up a development plan this year for its Columbus gas and condensate discovery in the UK North Sea as field operating costs have been nearly halved in the region.
The London-listed independent intends to develop the find as a single-well subsea tieback to the Shell-operated Lomond facilities as improved reliability of the latter makes it the most economic offtake option for Columbus exports, it said in a statement.
Serica aims to exploit net proven and probable reserves of 6.2 million barrels of oil equivalent at Columbus, based on its 50% operating stake in central North Sea blocks 23/16f and 23/21a that host the find.
The company plans to reach an agreement with partners on the offtake route and drilling plans for the field this year, and gain their support for an investment decision with a view to compiling a full development plan for submission to the UK’s Oil and Gas Authority (OGA) in line with the OGA’s maximising economic recovery (MER) initiative.
“The recent rise in UK gas prices is encouraging but it is important to ensure the development is underpinned by sound economics through what may continue to be a period of volatile commodity prices,” Serica stated.
The Lomond tieback option would “deliver the best economic value for other facility users” by lowering operating costs per barrel for all parties and extending the economic life of the facilities to maximise total reserves recovery, it said.
Serica’s faith in the field project is underpinned by recent analysis that shows average UK North Sea operating costs have been slashed from $29 to $16 per barrel over the past two years due to cost-cutting by operators, as well as keen price competition among contractors amid low oil prices.
The company’s financial position has also been bolstered by the restart last August of the Erskine field off the UK after a costly six-month closure, with the field delivering net output above expectations of 3150 barrels of oil equivalent per day, also via the Lomond platform.
The addition of throughput from Columbus and other fields at the platform would further lower operating costs at Erskine that have averaged below $20 per boe since the restart, according to Serica.
The company’s cash balance has been boosted to $16 million from Erskine output and this figure is expected to increase to around $20 million with December net sales, giving it more clout to fund future field opportunities as well as possible asset acquisitions.
Serica is meanwhile looking to participate in a pair of wildcats tentatively lined up for drilling in 2018 at the high-pressure/high-temperature Rowallan prospect in the UK North Sea and Doyle prospect in the East Irish Sea, with costs on both wells to be carried by third parties.
The company, which is also pursuing licence extensions off Ireland and Namibia, said “progress on reducing drilling costs, allied to firmer indications on the mid-term direction of commodity prices, offer encouragement for companies to look ahead to 2018 and beyond with greater confidence”.