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EnQuest has delivered Kraken heavy oil field ‘considerably under budget’

The North Sea oil firm has delivered the Kraken oil field, a US$2.5bn project that’s expected to produce up to 50,000 barrels of oil per day and some 1,000 oil jobs.

EnQuest - Kraken floating production storage and offloading (FPSO) vessel
Kraken’s floating production vessel is the biggest deployed in the UK

EnQuest Plc (LON:ENQ) has confirmed a major milestone in its production growth, with the declaration of ‘first oil’ at the Kraken oil field in the North Sea.

The significant heavy oil field development project reached the landmark on Friday June 23, EnQuest confirmed on Monday.

In London’s early deals, EnQuest shares advanced 2.5p, 8.5%, to trade at 32p each.

Kraken’s initial development comprises thirteen wells – seven producers and six injectors – and the company told investors that the wells are being brought online in a phased manner in order to maximise the field’s long term productivity and value.

Amjad Bseisu, EnQuest chief executive, highlighted that the project has been delivered on schedule and under budget.

“Kraken is a transformational project, made possible by EnQuest's differential capabilities; the right mix of integrated technical capabilities, high levels of efficiency and cost discipline.

“With production from Kraken, EnQuest is moving from a period of heavy capital investment, to a focus on cash generation and deleveraging the balance sheet.”

Bseisu also noted that the company has so far completed two of Kraken’s three drilling centres, and as such it is expected that further production capacity will be opened up, in 2018, as the additional wells are put on-stream.

Kraken is 70.5% owned by EnQuest, with Cairn Energy PLC (LON:CNE) holding the other 29.5%. The field hosts some 128mln barrels of crude oil reserves and is expected to have peak production of around 50,000 bopd.

It is measured as one of the largest new oil fields to come online in the North Sea in over a decade, since the Buzzard field which began in 2006.

One of the “most significant” new fields

Dr Andy Samuel, chief executive of Britain’s oil regulator, the UK Oil & Gas Authority, highlighted that Kraken had ‘clearly benefitted’ from a strong partnership between the operator (EnQuest) and key service providers.

“As one of the most significant oil field projects in the UK Continental Shelf, successful production from Kraken is positive news for the whole basin,” he said.

“It has the potential to open up additional heavy oil opportunities in the Northern North Sea, with other developments in the pipeline.”

Meanwhile, the UK government’s Business and Energy Secretary Greg Clark highlighted: “This is a landmark project for EnQuest and the UK oil and gas sector as one of the largest new oil fields to come on-stream in the North Sea in a decade.

“This has been made possible through significant UK government support to encourage investments of this type in the North Sea, supporting thousands of highly-skilled jobs.    

“We'll continue to build on this support for the oil and gas sector as it looks to seize the significant opportunities that lie ahead."

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