IOG gets export route for Southern North Sea assets with pipeline buy

Independent Oil and Gas has signed a sale and purchase agreement (SPA) regarding the acquisition of the recently decommissioned Thames gas pipeline in the Southern North Sea (SNS).

To remind, the company recently extended the memorandum of understanding signed in January to facilitate the signing of the deal by all parties.

The Thames gas SNS pipeline will be bought for a nominal consideration from Perenco UK Limited, Tullow Oil SK Limited, and Centrica. The pipeline will provide IOG with an export route for its Southern North Sea assets.

IOG said on Tuesday that completion of the transaction is subject to regulatory consents and provision of security to Perenco to cover the cost of additional pipeline integrity surveys that may be required in the future which are estimated at a maximum cost of £500,000 ($621,000).

Upon completion, IOG plans to undertake intelligent pigging inspection to ensure the pipeline’s integrity for safe re-use.

When completed, the company intends to export gas from IOG’s Blythe and Vulcan Satellite hubs once they are in production. These two hubs require an estimated maximum throughput of approximately 150 MMcfd – well within the pipeline’s anticipated capacity.

Since the estimated initial capacity of the 24-inch Thames pipeline is 300 million cubic feet per day, IOG said the pipeline would have sufficient capacity to accommodate the export of gas from the Harvey discovery as well.

IOG will own 100 percent and operate the pipeline giving the company control from field to market. The gas will be transported via the pipeline to the Bacton gas terminal. A processing tariff will be payable to Perenco, the terminal owner.

The company said that it would acquire the onshore reception facilities at Bacton ahead of first gas. A period of exclusivity has been agreed until the end of September 2018. IOG added that it planned to use and upgrade the facilities in the meantime, subject to a construction and tie-in agreement which is currently being drawn up.

Under the terms of the acquisition, additional security to be held by Perenco, the current Thames pipeline operator, for future decommissioning will be required before beginning of gas export. The security is not expected to exceed £2.5 million ($3.1 million) including the pipeline integrity surveys.

Additional security will be provided post completion of the onshore facilities, before first gas from IOG’s gas hubs.

Mark Routh, CEO and interim chairman of IOG, said: “I am delighted to have signed the SPA for this strategically important acquisition. We acquired most of our SNS gas portfolio at low cost because the assets in this area were considered stranded without a viable export route.

“This acquisition allays those concerns and is therefore of great importance to IOG as we now have a route to market for our gas. Subject to completion and remediation it will enable us to deliver up to half a trillion cubic feet of gas resources to the UK market over a period of fifteen to twenty years from the end of next year. We are also open to working with third parties who may wish to use our export facilities for a tariff.”

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