Angus Energy announced this morning it had completed a farm-in agreement for the Saltfleetby gasfield in East Lincolnshire.
Under the deal, the previous operator, Wingas Storage (UK) Ltd will pay £2.5m to an Angus subsidiary.
Angus Energy Weald Basin No 3 Ltd also gets a 51% stake in the exploration licence, PEDL005, and becomes the licence operator.
Angus has previously said the cost of the deal was £1.
Angus said in a statement to investors it would use the money to connect Saltfleetby to the national gas grid. The work is currently scheduled for May-August 2020, it said. Production from the field would then start, Angus said.
If reconnection were not commercially possible, Angus said the money would be its contribution to field abandonment costs.
Wingas, which has renamed itself Saltfleetby Energy, is expected to hold the remaining 49% interest in the licence and share future field and abandonment costs, as well as revenues. It retains liability for abandonment costs of subsurface pipelines and some other redundancy costs, the statement said.
The deal has to be approved by the Oil & Gas Authority.
In an interview last month, Angus Energy’s managing director, George 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.”
This led to criticism that abandonment money would be used for reconnection work.
Today Lord Lucan described it as an “excellent deal”, which diversified the company’s asset base.
The statement said reconnection costs had been quoted at £2.25m-£2.5m and abandonment at £1.75m-£2.5m.
The Saltfleetby gas field was discovered in 1996. It has eight wells and several sidetracks, the statement said. Seven wells were licensed for production.
In a statement to investors in April, Angus said the then un-named 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.
Angus said the reservoir had produced 67 billion cubic feet (bcf) of gas. It estimated 10-18bcf could be recoverable over 10-12 years. It also estimated that 100,000-180,000 barrels of gas condensate would be recoverable.
The company said it would install processing facilities, including compression and dew-point control at the site.
Angus said it aimed to reduce operating costs from £1.8m to £1m by cutting overheads and streamlining the operating process.
Updated 21/6/2019 with new map. The previous map showed the incorrect licence area.