LONDON: Angus Energy announced, further to its announcement of 30 April 2019, the completion of a Farmin Agreement with Wingas Storage (UK) Limited (Saltfleetby Energy) for a 51% interest in the Saltfleetby Gas Field in Lincolnshire. Saltfleetby Energy is expected to retain a 49% interest in the field. [the_ad id=”31605″]The terms of the Agreement are that Saltfleetby Energy will pay to Angus Energy Weald Basin No. 3 Limited (AWB) an initial contribution of £2.5 million which funds will then be applied by Angus either (a) to assume 100% of the costs to be incurred during the reconnection of the Field to the National Gas Grid or (b) to satisfy all abandonment costs at the Field (excluding existing subsurface pipework beyond the immediate sites) if reconnection at commercial rates is not available.
At this stage the Directors are confident that reconnection at commercial rates is possible within the £2.5 million budget and advised timescale of completing work between May and August 2020.
Following reconnection and a declaration that gas can be extracted and sold in a commercially viable manner, future abandonment costs together with ordinary Field costs and revenues will be shared 51%/49% by the Group and Saltfleetby Energy under a standard JOA.
AWB expects to execute agreements, subject to OGA approval, under which Saltfleetby Energy will transfer to AWB, as soon as regulatory consent is obtained, a 51% share in the relevant blocks, comprising the Field, of the PEDL 005 Licence together with the Operatorship thereof. These, together with assignment of the underleases of the sites and regulatory assents, are the sole conditions precedent.
Angus Energy has obtained quotes for the work and equipment required to effect reconnection (£2.25 – £2.5 million) and separately to effect abandonment (£1.75 – £2.5 million), each of which fall below the sum of the proposed payment by Saltfleetby Energy.
Saltfleeby Energy has agreed to retain the liability for all abandonment costs surrounding the subsurface pipelines from the two sites to the Theddlethorpe Gas Facility together with certain redundancy costs which would otherwise fall to be treated as expenses under the JOA.
The Saltfleetby Gas Field is located onshore UK at the western extent of the Humber Basin, in the PEDL005 licence area. A commercial discovery was made in 1996 after re-entering an exploration well drilled in 1986. The field was put on stream in December 1999 producing from Early Westphalian sandstones at a depth of 2300m.
The Conservative scenario assumes unconstrained production with 2 wells running subject to a decline rate of approximately 15% based on historical production. The optimistic case assumes workover activity and bringing new wells online shortly after production start up. Under the conservative scenario, the field appears capable of producing 10 BCF over the next 10 years. The optimistic case indicates a production of 18 BCF over 12 years.