IOG to Avoid ‘Significant’ Skipper Spending
Friday 29 September 2017
Independent Oil & Gas (IOG) is to hold off on ploughing any significant investment into its Skipper heavy oil discovery in the UK’s northern North Sea as it continues talks with creditors over remaining liabilities from the well campaign.
Analysis of results from the appraisal well on Skipper, located in Block 9/21a in licence P1609, that was drilled in August last year yielded disappointment for the operator.
The oil in the well has a high density, high viscosity and high total acid number, although it was found to be mobile in the very high permeability reservoir and at ambient conditions, due to its low wax content.
“The Skipper licence continues up to February 2019 and the company is undertaking limited further technical and commercial evaluation, including building a reservoir model to simulate the oil’s mobility in the reservoir,” IOG said.
“If a field development plan can be designed to enable the economic extraction of oil from the Skipper field, the oil properties will present a challenge for refining and marketability.”
However, IOG added that it is likely any sold oil “would trade at a significant discount to the prevailing Brent oil price”. The discovery was written down at the end of last year.
IOG said on Friday: “Work at Skipper … has led us to conclude it is less attractive than our gas portfolio, where we are now channeling our resources. We have decided not to allocate significant further capital to the Skipper asset at this stage.”
The company is ploughing resources into its southern North Sea gas assets off the UK, after recently submitting its development plan for the Blythe Hub project. The Elgood gas field would be developed as a subsea tie-back to Blythe.
The company earlier this week signed a letter of intent and a consultancy master services agreement with Schlumberger concerning the Blythe Hub and Vulcan Satellites Hub schemes.
IOG is still speaking with creditor at Skipper over liabilities. “ The total cost of the Skipper appraisal well was £10 million ($13.41 million today),” it said on Friday.
“As previously announced, this has been part financed via loans and deferred payments which are due to be repaid at the end of 2017. The total loans and deferred payments drawn for this purpose was approximately £6.8 million.
“Discussions with the creditors for the remaining liabilities relating to the Skipper well are progressing with a view to either repaying, rescheduling or converting part of these into equity before the end of 2017.”