A pioneering project to bring a decommissioned Southern North Sea gas pipeline back to life could flow enough gas to heat nine million UK homes for a year by 2020.
The ‘different thinking’ will save £100m on new pipeline.
The 90km decommissioned Thames Gas pipeline, which comes in at Bacton in north Norfolk, was bought by pioneering Independent Oil & Gas (IOG) for £1 this year to be recommissioned to bring in more than 500 BCF of gas from IOG’s wholly-owned gas hubs.
Building a new pipeline would have added £100m and about two years to the project, which centers on IOG’s hub strategy, the company’s chief executive Mark Routh revealed at an East of England Energy (EEEGR) event in Norwich.
In the first recommissioning of a decommissioned SNS pipeline, IOG plans to drill 10 wells, lay over 70km of new connector pipelines and install up to five new platforms for its Blythe and Elgood and Vulcan Satellite hubs. The Harvey appraisal asset, between the Blythe and Vulcan hubs, has been identified as a large discovery and is likely to also be part of the project as a third hub to the development.
Supply chain companies are being invited to work with the IOG, with a prize of deferred “significant” payment on production, estimated at 150 MMcfd at its peak by 2020.
Routh told more than 70 delegates at EEEGR's SNS Rejuvenation Special Interest Group: “This is hub strategy in action.”
“This has never been done before,” he said in his first public speech about the project, which has a total £300m capital expenditure estimate.
IOG’s business plan is to acquire assets at low cost, own and operate them 100%, and get them producing, thereby taking half a tcf of gas to market, he said.
“It is a lot of gas and it will be beneficial for the UK and the supply chain in this area.”
IOG now had everything it needed for the Blythe and Elgood field development plan and the environmental surveys started in February in preparation for the submission of the Field Development Plans to the Oil & Gas Authority later this month, he said.
The project to recommission a 60km section of the Thames pipeline is currently under way, with plans to send Intelligent pigs down the 24-inch pipeline to assess its condition.
A solution to any problems could be a 16-inch pipeline run through the current pipeline, which would be subject to more rigorous inspection than many other pipelines in the SNS, he said.
“Pipelines are usually over-engineered – some of the 1960’s pipelines are still flowing gas safely more than 20 years beyond their initial design life,” Routh said. The Health and Safety Executive was supportive of IOG’s plans, he said. “It is a no-brainer. We are going to do it. We compared the price of a new pipeline - £100m – and the time it would take to acquire and permit its installation, two or more years. In capex terms, we are already £100m ahead.”
IOG’s hub model started with the stranded Blythe asset, which presented challenges with infrastructure and nearby pipelines transporting low pressure gas. It acquired the other half of Blythe field and looked elsewhere in the area for more fields, acquiring the three Vulcan satellites fields.
“We saw a pipeline was empty and, if we recommissioned it, we would have a pipeline that could start to unlock these stranded assets.” Acquiring the pipeline from Perenco, Centrica and Tullow had cost £1, with IOG taking on all future liabilities which actually amount to more than several million pounds.
“We have been looking at all elements of the supply chain and we are talking to people in the East of England.”
Two key personnel from the nearby analogous Clipper South gas field development have joined IOG for the project, Andrew Hockey as deputy CEO and Graham Cox, as SNS project manager.