Jersey Oil & Gas to develop Greater Buchan project with low-emission electrified platform
(JOG ) has today reported key findings from a Concept Select Report ("CSR") in respect of its Greater Buchan Area ("GBA") Development Project in the North Sea.
The report highlighted the potential for 172m barrels of oil 2C contingent resource estimates to be developed from a fully electrified platform targeting lower carbon levels.
In line with the UK Government's Net Zero policies, JOG’s aim is to deliver production from the planned GBA Development Project at an industry leading carbon intensity level due to Platform Electrification, a process currently seen in certain fields in the Norwegian sector.
CEO, Andrew Benitz said "The GBA has the scale to be extremely low carbon through platform electrification at the same time as offering highly favourable project economics.”
The Company said the GBA is ‘optimally located in the heart of the UK Central North Sea such that there is exciting potential for JOG to be an enabler for regional electrification.’
A "Net Zero" solution for the GBA Development Project is economically attractive, despite a 'Green Premium' compared to the conventional case utilising gas turbines, Jersey noted.
The Company highlighted that costs associated with the provision of a subsea cable and grid connection outweigh the cost reductions associated with the removal of gas turbines and associated utility systems, resulting in a CAPEX increase of approximately £80 million.
Overall carbon emissions from the GBA with platform electrification are estimated to be <1kg/boe. This compares to estimated carbon emissions from the GBA development using gas turbines of 13kg/boe, which is less than the UKCS average of approximately 20kg/boe.
Meanwhile, the Group stated that it remains on track to deliver on its Licence commitment to deliver the Concept Select to the Oil and Gas Authority ("OGA") by July this year.
The Concept Select Report, which maps out a three-phase development for the Buchan field, would act as a hub for JOG to find further discoveries within the Greater Buchan Area.
Project economic estimates for the core GBA with platform electrification as the Company’s preferred low carbon power solution is US$6.4bn, with a net present value of US$1.7bn estimated overall. The Company noted that the payback period could be achieved in under 3 years while the project internal rate of return ("IRR") would come in at greater than 25%.
Total development costs based on today's values are estimated to be around US$30/boe with Phase 1 expenditure of around £1bn. Operating costs during plateau production are estimated at US$8/boe to US$9/boe while total project costs are estimated at c.US$30/boe.
The Company stated that with the preferred development concept identified, JOG is now ready to launch its planned and previously announced farm-out process for the GBA.
"We now plan to launch a farm-out process, which we expect to be highly attractive to a wide range of oil companies in light of the project's scale, economics and low carbon potential through platform electrification, characteristic of certain fully electrified fields offshore Norway,” said Benitz.
The Board anticipates that this farm-out process will be well received by the industry ‘as an exciting investment opportunity, in light of its scale, economics and low carbon production approach, and currently intends to conclude this process before the end of 2021.’
Shares in Jersey Oil & Gas have nearly doubled in value since the beginning of 2021 from 124.5p. The stock ticked up 2.21% this morning to 231p as a result of the announcement. Importantly for investors, further positive newsflow from the important 'farm-out' in 1Q21, povides signifiant near-term potential for the shares to advance further as visibility of JOG becoming a significant UK E&P player materialises.
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