The company behind plans to frack in North Yorkshire has told community representatives it is now concentrating on its conventional gas business.
Third Energy has been waiting for final consent from the government to frack at Kirby Misperton, more than three years after being granted planning permission.
Equipment to frack the KM8 well was mobilised in autumn 2017. But ministers delayed giving the go-ahead in order to carry out a financial resilience test on the company, at the time almost wholly owned by Barclays.
Since then the business has been sold to York Energy, a subsidiary of an American company. There have been no public announcements on the result of the financial resilience test.
This week, Third Energy told the Kirby Misperton community liaison group (CLG) that the focus in Ryedale was now on the conventional gas sites.
The company has 20 wells across six different sites in the district. The gas is piped to the Knapton electricity generating station. But according to Third Energy, only four of the wells are producing.
Earlier this week, Ryedale District Council unanimously objected to Third Energy’s planning application to extend the life of the wellsites and the pipeline network until 2035.
After this vote, DrillOrDrop asked Third Energy a series of questions about its plans. The company sent us a statement today. A spokesperson said it was based on the information given to the CLG.
The statement confirms that fracking in Ryedale is no longer a priority for Third Energy:
“York Energy’s decision to buy Third Energy Onshore was on the basis that the conventional business can be profitable, productive and sustainable.
“Our immediate business focus is therefore upon increasing production and ultimate recovery from the conventional fields, and this is the focus of our full attention.
“We are prioritising a number of investment opportunities and propose to undertake these projects over the next few months.”
DrillOrDrop understands the company is looking to dewater wells at the company’s Pickering site. It is also reportedly looking to replace the turbine at Knapton generating station.
The statement continued:
“Further conventional exploration and development potential within our licences is also under review and is likely to form part of our overall investment plan for the business.
“Design work has commenced to prepare for the introduction of new generating capacity at Knapton to increase our operational efficiency.”
The spokesperson said the current planning applications, due to be decided by North Yorkshire County Council next month, were “an integral part of our plan to extend the economic life of the fields”.
This week’s news on Third Energy’s future plans is interesting timing. Planners at Ryedale District Council said the authority was “strongly opposed” to fracking. They also suggested that Third Energy was seeking to extend the life of the conventional sites to provide infrastructure that would support hydraulic fracturing in future. “This is not acceptable”, the planners said.
Last year, before the sale to York Energy, Third Energy agreed to a series of work commitments for its Ryedale licences largely focused on unconventional operations.
The work programme, agreed with the licence regulator, the Oil & Gas Authority, included fracking KM8 by December this year (2019). It also required Third Energy to drill, frack and test another three wells from September 2020-December 2022 and drill a further three wells from 2023-4.
But it appears these commitments will now change and we understand the KM8 frack won’t happen by the target date.
The Third Energy spokesperson told us:
“Given the priority we place upon maximising the economic return from the conventional fields, Third Energy is working with the OGA to update our work programmes to include more emphasis upon further developing conventional resources within the licence area.”
According to Third Energy’s financial records, the company was previously struggling to maximise production from the Ryedale conventional wells.
The most recently published accounts, for the year up to December 2017, said the company needed £14m to develop the Ryedale gas field and more cash injections to stay afloat.
Liabilities had risen to £63.9m and annual losses were £3.5m. Turnover was down from £757,000 in 2016 to £191,000 in 2017.
There was “significant doubt” about the company’s ability to continue as a going concern and Barclays had put it up for sale.
The accounts indicated that Barclays, through Third Energy Holdings Limited, was not “expected to provide the required funding to support the necessary activities to enable the group to progress to cash generation and continue as a going concern”.
Following the sale to York Energy, Third Energy is reported to have no debts. A series of loans were discharged in July 2019, after the deal was finalised.2
“No intention to frack as an experiment”
Hazel Winter, a member of the CLG, confirmed what Third Energy told this week’s meeting.
“At the CLG meeting Third Energy informed us that for the foreseeable future they would be concentrating on their conventional industry and would not be fracking by the end of 2019. They said the new owners saw the potential of their existing wells so they would be developing this resource as a priority.
“Alan Linn [Third Energy chief executive] stated there was no intention to invest in fracking on an experimental basis in the current climate, but the company would only frack if gas could be produced commercially and they would be discussing all their licences with the OGA. As they have only been working with the new owners for five weeks, there are no definite plans as yet, but there will be a community meeting in November to communicate proposals.
“As a local resident I am delighted that the controversial process of fracking, which caused so much conflict and threatened our environment will not be returning anytime soon. I would far rather have conventional gas used in the short term as a bridge fuel, than unconventional gas or imported LPG.”
“Costs to taxpayer”
Ms Winter raised concerns about the wasted costs of monitoring the KM8 well and policing anti-fracking protests.”
“I am concerned that the planning and regulatory system allowed a company to get to the stage of carrying out a workover and bringing on all the fracking equipment, only for it all to go back off because they didn’t have the financial resilience to continue, especially when this was the flagship operation to prove the viability of the industry. Surely the plug should be pulled earlier if the company do not have financial resilience? This has cost the taxpayer dearly in wasted monitoring costs and wasted policing costs.
“Government refuses to address decommissioning”
Ms Winter also said there were concerns about what would happen if the conventional wells were not successful:
“When I voiced my concerns via my MP Kevin Hollinrake to Claire Perry in February 2018, her response was that this was the commercial decision of the operator. If that is the case how can a similar situation be avoided in the future? If Third Energy find that their conventional wells do not bring sufficient commercial quantities of gas what happens then?
“The government still refuses to address the problem of who is responsible for decommissioning and restoring wells if a company fails. It will be interesting to see the response of the OGA when Third Energy renege on their licence commitments to frack and the response of North Yorkshire County Council to the current blanket time extensions on the company’s wells, two of which produced nothing during their last time extension. I don’t believe local communities are protected by this regulatory regime.”
- DrillOrDrop reported in a guest post last month on how one North Yorkshire resident had put questions to the OGA through solicitors about the financial resilience of Third Energy’s new owners, Alpha Energy. Eddie Thornton told us:
“We need to know that if Alpha Energy fails, it’s not going to be the taxpayer that foots the clean-up bill.”