AIM-listed Jersey Oil & Gas, an independent upstream oil and gas company focused on the UK Continental Shelf region of the North Sea, has finalised the Greater Buchan Area ('GBA') development solution.
Highlights
- Redeployment of a Floating, Production, Storage and Offloading ('FPSO') vessel selected as the preferred GBA development solution - lowest cost and lowest full-cycle carbon footprint option
- The North Sea Transition Authority ('NSTA') has completed its review of the selected development solution
- Key commercial terms agreed for the potential acquisition of a high-quality FPSO, subject to negotiation and execution of fully termed agreements
GBA Development Solution
JOG and NEO, as the incoming operator of the GBA licences, have determined that the preferred development solution is via the redeployment of an FPSO. This solution benefits from being both the lowest cost development option and the one that results in the lowest full-cycle carbon footprint of all the potential options evaluated. This is driven by the ability to re-use existing infrastructure that can be located directly at the Buchan field and, with limited modifications, make the FPSO 'electrification-ready' upon its redeployment. This will enable the vessel to have the potential to be connected to one of the anticipated floating wind power developments that are intended to be located in close proximity to the GBA following the recent Innovation and Targeted Oil & Gas ('INTOG'") licence awards made by Crown Estate Scotland.
The preferred development solution aligns with the NSTA's obligations to maximise the economic recovery of reserves and assist with achieving the UK government's net zero target. The NSTA has issued a letter confirming it has no objections to the Concept Select Report submitted to support the Buchan re-development programme.
With the GBA development solution now identified, work is progressing on the engineering studies that are required prior to submission of the development plan in 2024. The Company estimates that the total capital expenditure for the Buchan field re-development, including the cost of acquiring the FPSO, will be in the region of $900 million (gross cost). This estimate will be assessed and refined with NEO as part of completing the Front End Engineering and Design and contract tendering activities that precede Field Development Plan ('FDP') finalisation.
Following the recently completed farm-out transaction with NEO, the Company has a 50% working interest in the GBA licences. Through the expenditure carry arrangements agreed with NEO, JOG will be carried for 12.5% of the Buchan field re-development costs (equivalent to a 1.25 carry ratio). In line with JOG's stated strategy to farm-out a further interest in the GBA licences, it is targeted for the Company to ultimately retain a fully carried 20-25% interest in the Buchan re-development.
Further information on the core components of the development programme and execution schedule will be provided as the work progresses. The Company is also planning to commission an independent reserves evaluation as part of its end of year financial reporting process.
Proposed FPSO Acquisition
In tandem with the specification of the preferred development solution, the GBA partners have agreed the key commercial terms for the proposed acquisition of an existing FPSO. The proposed acquisition is conditional on the negotiation and execution of relevant transaction agreements, including a sale and purchase agreement. The acquisition would form part of the carry arrangements agreed between NEO and JOG.
Andrew Benitz, CEO of Jersey Oil & Gas, commented:
'We are delighted to have finalised the GBA development solution and agreed key commercial terms for securing an FPSO for redeployment on the Buchan field. This marks a major step forward for the project, not least by providing the GBA partners with a solution that minimises the overall carbon footprint of the project and provides the opportunity to be an early participant in the UK oil and gas industry's offshore electrification plans. We look forward to working closely with NEO, as the incoming operator of the GBA licences, on preparing the overall Buchan field re-development plan that is anticipated to be submitted to the NSTA during the first half of 2024.'
Source: Jersey Oil & Gas
