Investors and anti-drilling campaigners have criticised proposals by Angus Energy to use money intended for decommissioning to connect a shut-in gas field to the grid.
The company’s managing director, George Lucan, said Angus was considering taking on the operatorship and 51% of the licence of the un-named gas field in northern England
In an interview with IGUK yesterday, Lord Lucan said:
“We get with the asset a contribution toward abandonment liability of £2m and that will cover, more than cover, our tail-end liability which is 51% of abandonment. We can use that £2m right now to reconnect.”
“For £1 [the cost of the deal] we get a chunk of money for reconnection”.
An online presentation, posted on the Angus website yesterday, confirmed Lord Lucan’s comments.
“The Gas Field presents an opportunity for field rehabilitation and further development. Under heads of terms agreed the 51% share comes with a contribution to abandonment costs which we believe will cover our share of the costs required to re-establish production and reconnect to the National Grid without any immediate further funding required.”
One investor on an Angus Energy message board said he had never seen “any oil company dip into the abandonment pot to fund their drilling and/or production”.
He described the proposal as “crazy”, saying “the money [for abandonment] is kept separate and out of reach to prevent a company spending the money and then going bust leaving the government footing the entire bill”.
Campaigners against onshore drilling called for the decommissioning money to be “ring-fenced” in case Angus went out of business and was not able to pay for abandonment.
Lord Lucan said in the interview that the deal was at an “advanced stage”. He would not disclose the location of the gasfield.
But a statement to investors last month said the field had been in production “on and off” for 20 years. It stopped production in 2017, the statement said, when a nearby refinery terminal closed.
According to production data from the Oil & Gas Authority, the only gas field that stopped production in 2017 was Saltfleetby, near Mablethorpe, in Lincolnshire, operated by Wingas, owned by Gazprom.
In the interview, Lord Lucan estimated that the field still had 11-22 billion cubic feet of recoverable gas.
“If we close this deal, this is not an exploration project. These were producing fields with seven sunk wells, cost paid, just capped up for the moment.
“All we have to do is reconnect the thing and keep it working. It’s a job we can do very cheaply and very well and the vendor, it’s below their threshold.”
The Angus online presentation estimated a cost of £1m to install in-house gas processing and £0.5m-0.7m for a new 10 inch flowline to divert around current facilities and feed directly into National Grid.
Lord Lucan said the current owner was “an enormous company” and field was “of very little interest at the tail end of its life”
But for Angus, he said:
“For us, where we work with much, much finer costs, it’s a feast.”
Asked whether the deal would be a game-changer for the company, he replied “absolutely”.
Shares in Angus Energy closed down 4.4% today at 3.825p.