Green light for North Sea development with first oil expected this year

North Sea-focused Ithaca Energy has secured consent from the authorities for the development of a subsea tie-back to its FPF-1 facility located in the UK North Sea with the first oil expected later this year. Ithaca is also on track to enlarge its oil and gas portfolio through the acquisition of Summit E&P for a price tag of $224 million.

Ithaca Energy applied to the Secretary of State for Business, Energy and Industrial Strategy for consent for the development of the Abigail field, formerly known as Hurricane, in late 2020. The company also filed an application with the UK’s Oil and Gas Authority (OGA), recently renamed to North Sea Transition Authority, in relation to the Abigail field development and submitted the environmental statement for the project.

The Abigail oil and gas field lies in United Kingdom Continental Shelf (UKCS) Block 29/10, which is located in the central North Sea, approximately 233km east of Peterhead and 36km from the UK-Norway median line. The estimated field life is eight years.

As informed by Ithaca on Thursday, the development consent for the Abigail field was received from the North Sea Transition Authority in January 2022, meaning the field development plan (FDP) and the Environmental Statement (ES) were approved. The first oil from the project is still expected to be achieved in 3Q 2022. The estimated recovery is about 4 – 10 mmboe (100% Ithaca W.I.)

According to the company, engineering and procurement activities are progressing and preparations are in place for rig arrival in March 2022. Key long lead items – christmas tree, flowbase, wellhead – are on schedule for delivery ahead of drilling commencement.

Ithaca awarded a contract for operations on the Abigail well and the Captain phase II subsea development to COSL Drilling Europe at the beginning of October 2021. The 6th Generation harsh environment semi-submersible drilling unit, the COSLPioneer, will be used for this project. Starting this month, the drilling campaign has a combined work scope with an estimated duration of up to 2Q 2024. According to the latest available AIS data, the rig is already in the North Sea.

Abigail is a phased subsea development in the North Sea with phase 1 consisting of a single subsea well and subsea tie-back to Ithaca’s FPF-1 facility and phase 2 will include the drilling and tie-in of a second production well.

Phase 1 involves the re-entry and completion of an existing appraisal well as a production well, installation of a new 12-kilometre pipeline system (production, gas lift and service lines), manifold and subsea isolation valve, tied back to the existing FPF-1 installation located in Block 30/06. Phase 2 is contingent on field performance and comprises a second, new, production well and tie-in to the manifold.

Ithaca’s cash spend on capital expenditure in 2021 was $248 million, with the key contributors being Captain, Abigail, and Fotla.

Ithaca also informed that, on 28 February, a further agreement was signed to acquire 100 per cent of the share capital of Summit Exploration and Production, which was based on an enterprise value of $148 million. Taking into account cash of $70 million and other adjustments, the headline consideration is $224 million.

The agreement has an economic date of 1 January 2021 and is subject to normal completion activities including consent from the North Sea Transition Authority.

Summit E&P confirmed the deal with Ithaca and said it is in line with the strategy of its shareholder, Sumitomo Corporation, to transition towards lower carbon energy systems. Upstream oil and gas assets will be divested while a new sister company to Summit E&P has been established as a 100 per cent subsidiary of Sumitomo Corporation – Summit Energy Evolution Ltd (SEEL).

The new entity – SEEL – will take over Summit E&P’s existing low carbon energy businesses, including the leadership of the Bacton Energy Hub Supply SIG and participation in other Bacton SIGs. The aim is that SEEL will become the vehicle for Sumitomo Corporation’s future interests in hydrogen and other low carbon energy businesses in the UK, particularly those related to repurposing and decarbonisation of existing oil and gas infrastructure, and utilisation of Sumitomo’s and Summit E&P’s existing skills and experience in subsurface, engineering, offshore and renewables technologies.

John Austin, CEO of Summit E&P, stated: “Summit E&P has been refocussing its interest over the last two years, away from fossil fuels and towards the new low carbon energy systems which are rapidly developing in the UK. It is sad Sumitomo departs the UK upstream oil and gas sector after so long, but I am pleased to have delivered excellent returns to our shareholder consistently for many years.”