Spirit set to join Hurricane in E&P west of Shetland

Spirit Energy will fund the cost of three exploration wells on the Greater Warwick Area 100 km (62 mi) west of Shetland, under a farm-in deal with operator Hurricane Energy.

Greater Warwick Area west of Shetland
Greater Warwick Area west of Shetland

Offshore staff

WINDSOR, UKSpirit Energy will fund the cost of three exploration wells on the Greater Warwick Area (GWA) 100 km (62 mi) west of Shetland, under a farm-in deal with operator Hurricane Energy.

The $180-million drilling campaign is designed to firm up potential reserves in the area, thought to hold 2 Bboe of prospective and contingent resources.

The wells, to be drilled from 1Q 2019 onwards by the semisubmersibleTransocean Leader, will target the 2016 Lincoln discovery and the Warwick exploration prospect, estimated to contain respectively 604 MMboe of 2C and 935 MMboe of prospective resources.

Spirit Energy plans to fund the transaction from its existing cashflow and will also finance certain engineering work and long lead items for future phases.

Should the wells and further tests in the area turn out to be successful, the two companies plan to progress Lincoln and Warwick toward full field development, at which point Spirit Energy would become license operator.

The company would draw on its experience of operating production facilities on the UK continental shelf, including FPSOs, which may be needed for the development.

Spirit Energy’s chief executive Chris Cox said: “Appraising the Lincoln discovery and exploring for new reserves in Warwick offers a tremendous opportunity for Spirit to participate in the early phases of resource maturation in one of the last known world-class oil development opportunities in the UK...”

TheTransocean Leader will drill a horizontal appraisal well on Lincoln and two horizontal exploration wells on the adjacent Warwick.

If the results in all cases are successful, each well will be suspended as a future producer. Spirit Energy and Hurricane will then aim for a tie-in of one of the wells, producing at a rate of 10,000 b/d to theFPSOAoka Mizu, currently undergoing preparations for the nearby Lancaster field early production system.

This would be followed potentially by a further three appraisal wells, front-end engineering and design (FEED), and sanction for the first phase of a full field development of the Greater Warwick Area in 2021.

Should these additional phases proceed, Spirit Energy will carry 50% of Hurricane’s costs of the tie in of the well to the FPSO and pay $150-250 million toward Hurricane’s costs for the full field development, contingent on a positive final investment decision.

The Greater Warwick Area comprises oil-bearing fractured basement reservoirs along the Rona Ridge in 150 m (492 ft) water depth, 100 km west of Shetland and 100 km north of Orkney and comprising the Lincoln (P1368 S) and Warwick (P2294) licenses.

Spirit Energy has agreed to farm-in to 50% of Hurricane’s Lincoln (P.1368 South) and Warwick (P.2294) licenses, which together comprise the GWA. This arrangement allows Hurricane to commit to a firm work program on the GWA, through end-2019, without jeopardizing continued activity in theLancaster area.

The work program comprises up to five phases, the main goals being to accelerate first production and reserve allocation, while providing a fasttrack to full field development sanction.

Following a final investment decision (FID) on the tieback to theAoka Mizu, Spirit Energy has also agreed to pay 75% (up to a maximum of $140.7 million) of the anticipated gross cost of the tieback and associated modifications to the vessel to accommodate the extra production.

One of the partners’ priorities will be to investigate de-bottlenecking of the vessel and gas evacuation – studies have already started.

Hurricane said the GWA farm-in would free up its cash flows not just for the Lancaster EPS, but also for appraisal and development of the rest of its portfolio.

Assuming Phase 1 is successful and FID is taken to proceed with the GWA well tieback, arrangements would also need to be made for tie-in of the gas to Total’s West of Shetland Pipeline (WOSP) system and to allow for first oil from an early production system on the GWA in 4Q 2020.

Hurricane stressed that its will retain 100% of the remainder of its portfolio including Lancaster, which should benefit from accelerated gas export, and the arrangement will maximize the benefit of infrastructure through de-risking of two accumulations in parallel.

09/04/2018

More in Regional Reports