The innovative new oil field development technology at the heart of Enegi Oil’s (LON:ENEGI) new strategy can cut start up costs by as much as US$300mln, according to Shore Capital analyst Craig Howie.
In a note, focussing specifically on the Energi’s 50% owned joint venture ABT Oil & Gas, the analyst likens the production buoy technology to a ‘mini FPSO’.
The system comprises a semi-submerged structure, hosting typically un-manned processing equipment, and would be connected to sea-bed storage facilities that can in-turn feed shuttle tankers.
It can be connected to a number of wells, and is designed to process up to 20,000 barrels per day, with storage of up to 300,000 barrels of oil.
The plan is to deploy these cost-cutting production systems to commercialise marginal or stranded offshore discoveries, which are located in water depths of 250 metres – although the technical specs would allow it to operate in up to 600 metres of water.
Howie explains that whilst it is new, in the sense that this is the first time the components have been put together in such a way, all the technologies have been proven in other systems.
He also highlights the fact that the facilities can be moved and deployed to other fields after their initial use, and as such there are significant savings in terms of decommissioning, and also capex savings for other projects.
An in-house conceptual study, based on a specific but un-named North Sea field – which has a stranded 8mln barrels of recoverable oil - estimates a pre-tax internal rate of return of more than 30%, based on initial capex of US$200mln.
But, Howie says, the returns have the potential to be considerably higher, as they don’t consider follow on projects – which he reckons could cost as little as US$75mln to develop if the field characteristics are the similar.
In the longer term there are worldwide opportunities for the company although, according to Howie, the scale of opportunity in the North Sea is already significant.
“We see numerous opportunities for ABT Oil & Gas to apply its buoyant development solutions,” the analyst said.
“ABT has obtained a global database from Infield Systems and screened two thousand undeveloped discoveries and abandoned fields for suitable development targets, incorporating water depths of up to 600m and reserves of less than 45mmboe.
“Over six hundred projects passed the selection criteria, with a combined resource of 11.3 billion barrels of oil equivalent.
“A large proportion (circa 40%) of these discoveries are located in the North West European Continental Shelf, implying a significant market opportunity for ABT Oil & Gas in the North Sea, in our opinion.”
Strategically, the focus has thus far been on securing interests in fields that meet the company’s criteria, via farm-in deals. Through separate deals now has stakes in the Antrim Energy (LON:AEY) operated Fyne field, and the Providence (LON:PVR) operated Helvick and Dunmore discoveries in Ireland’s Celtic Sea.
Fyne, which has 10mln barrels of reserves, is the most advanced of the three, and as part of ABT’s farm-in commitments the company is currently working on an adapted field development.
“We believe that ABT Oil & Gas’s solutions provide a major competitive advantage as the joint venture seeks to commercialise marginal fields, achieve early production and redevelop end-of-life projects.”