IOG expands SNS core project with Goddard discovery
Independent Oil and Gas (IOG) has expanded its Blythe Hub and the Vulcan Satellites Hub core project in the UK Southern North Sea (SNS) to include the Goddard discovery ahead of a final investment decision for the project.
IOG said on Tuesday that the two-phase core project was expanded to include the 108 bcf of 2C contingent resources assigned to the Goddard discovery.
The company added that the project now comprises a total of 410 bcf of 2P+2C reserves and resources across six discovered gas fields.
This delivers a 40% internal rate of return (IRR) and has a £358 million ($456.6 million) post-tax NPV10 with no additional funding required to develop Goddard. NPV10 is the present value of estimated future oil and gas revenues net of estimated direct expenses and discounted at an annual discount rate of 10%.
The fields will be developed in two phases with Phase 1 consisting of the Southwark, Blythe, and Elgood fields (158 bcf 2P reserves). Phase 2 consists of the Goddard, Nailsworth, and Elland fields (144 bcf 2P Reserves and 108 bcf 2C resources).
According to the company, Phase 1 of the project is technically ready to enter the execution phase with all engineering work required for FID complete. Commercial terms are substantially agreed with all major contractors.
As for Goddard, the license was awarded in the recent 30th round and began on October 1, 2018. Its 2C contingent resources are discovered gas resources which are also technically ready for development.
IOG added that Goddard also contains a further 73 bcf best estimate prospective resources to be appraised at the optimal time.
Currently, IOG’s development team is preparing FDP submission for the Goddard 2C discovery to the Oil & Gas Authority (OGA) during the first half of 2019. The company believes that the 2C Resources can be reclassified to 2P Reserves upon FDP submission.
The company is in the final stages of signing documentation for purchase of the onshore Thames reception facility where its 550 mmcf/d capacity Thames Pipeline lands at Bacton Gas Terminal on the North Norfolk coast.
Potential addition of Harvey
IOG said that it was ready to progress with funding plans, with a target of achieving FID in the first quarter of 2019 and achieving first gas within 20 months of FID.
The company is continuing discussions regarding funding of the Harvey appraisal well alongside its wider FID funding process. The project, with the addition of Harvey, would potentially deliver a 77% IRR and a £688 million ($877.5 million) post-tax NPV10 with a peak annual production rate of over 230 mmcf/d.
IOG estimates the Harvey discovery to hold prospective resources in the low/best/high case of 85/129/199 bcf and a 63% geological chance of success.
Andrew Hockey, CEO of IOG, said: “The award of Goddard to IOG in the highly competitive 30th licensing round was a big win for us – we consider it one of the most valuable remaining undeveloped UK SNS fields and an ideal fit for our portfolio, lifting our core project’s projected peak production rate as high as 146 MMCF/d. We assess the main part of the Goddard structure […] will be the largest field in our core project.
“We are technically and commercially prepared for project execution having made a head start on relevant offshore site surveys. In addition, the core project does not yet include the potential upside of Harvey, which subject to successful appraisal could add another 129 bcf best estimate prospective resources.”
Fiona MacAulay, IOG’s chairwoman, added: “The addition of the recently licensed Goddard field to the existing core project without increase to the overall funding requirement is a great example of the significant value our management team is creating for investors. We have identified a number of additional opportunities to further enhance our Southern North Sea asset base to add to our value and returns.”