Serica comes on board North Sea oil project

UK-headquartered Jersey Oil & Gas plc has wrapped up the sale of a partial stake in an asset on the UK Continental Shelf (UKCS) to Serica Energy (UK) Limited, a subsidiary of Serica Energy. This allows Serica to participate in the HitecVision-backed NEO Energy’s redevelopment project – for which a field development plan (FDP) is due to be submitted shortly – and other potential developments.

As a result of the acquisition, Serica Energy got its hands on a 30% non-operated interest in the P2498 (Buchan) and P2170 (Verbier) licenses, which together represent the Greater Buchan Area (GBA) project. The partners in the GBA project are now NEO Energy (50%, operator), Serica Energy (UK) Limited (30%), and JOG (20%). Serica has the option to participate in the redevelopment of the Buchan field, formally renamed Buchan Horst, and other potential developments in the GBA.

Following the completion of the transaction, Jersey Oil & Gas has received the associated milestone cash payment of $6.8 million. In aggregate, the GBA farm-out transactions provide the firm with up to $38 million in cash payments, $18 million of which has now been received, and a full carry on both pre-sanction costs and capital expenditure in the approved Buchan field development plan.

Mitch Flegg, Chief Executive of Serica, commented: “We are pleased to have completed this transaction which creates the possibility of adding a third production hub to Serica’s North Sea portfolio. As a potential domestic source of oil and gas with a low level of production emissions, a provider of quality jobs for UK workers and a generator of much needed future tax revenues, Buchan is the sort of project the UK needs as part of the energy transition.”

While the GBA encompasses several oil and gas accumulations some 150 km north-east of Aberdeen, in the Outer Moray Firth, the largest of these accumulations is the Buchan field which produced for over thirty years, ceasing production in 2017 owing to the end of the useable life of the floating production facility. The concept select report submitted to the NSTA for the redevelopment of Buchan is based on a new production hub located at the Buchan field.

The project will use an FPSO currently operating on the Western Isles fields and planned to come off-station in the second half of 2024. A phased development is envisaged involving the redevelopment of the Buchan field in Phase 1 and the possible development of the J2 and Verbier discoveries in Phase 2. Mid-case contingent resources from the Buchan field alone are estimated to be in the region of 70 million barrels of oil equivalent.

Other discoveries and prospects nearby might provide additional tie-back opportunities to the FPSO. A proposed FDP for Buchan is expected to be submitted to the NSTA shortly. Following the recent Innovation and Targeted Oil & Gas (INTOG) license awards, there is the possibility of third-party floating wind power developments located close to the GBA. The FPSO is expected to be connected to one of these, should they become available. 

While the timeline is subject to project sanction and regulatory approval, the first production is currently slated for late 2026 and peak production rates are expected to be around 35,000 barrels per day. The gross development costs are estimated to be in the order of £850-950 million.

The Buchan field will be developed through the use of up to five subsea production wells, supported by two water injection wells tied back to the FPSO Western Isles, which will be modified to be electrification-ready before redeployment to the field.