A North Sea-focused minnow that won backing from US billionaire Warren Buffett has been given the green light to proceed with a development it reckons will be a commercial success in spite of the recent slump in commodity prices.
Independent Oil & Gas has won regulatory approval for its plan to bring a range of undeveloped gas finds into production.
Chief executive Andrew Hockey said: “Such government endorsement brings a welcome boost to the UK offshore industry and supply chain given the current environment.”
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North Sea industry leaders warned last week that the supply chain had been left at breaking point following the fall in oil and gas prices triggered by the coronavirus.
However, Mr Hockey reckons the project that has won approval provides a definitive example of how progress can still be made in the official drive to maximise the economic recovery of the North Sea’s reserves.
The project will involve revamping a disused pipeline to produce gas from finds that other firms did not think were worth developing.
Independent expects to be able to produce gas from the development relatively cheaply.
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A company owned by Mr Buffet’s Berkshire Hathaway bought in to the project last year. CalEnergy Resources paid £40 million for a 50 per cent stake in the project and agreed to cover up to £125m of IOG’s costs.
Independent raised bond funding to cover its shares of the costs.
First gas from the Southern North Sea development is expected late in 2021. Gas prices may be higher then.
The cost of support services is likely to fall in response to moves by other firms that operate fields to curb spending.
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London-based Independent is considering increasing its footprint in the North Sea.
It applied for more acreage in the latest licensing round. The company had £98m cash at the end of last year.
Mr Hockey said the company can draw on core strengths that include control of a proven resource base and key infrastructure and the fact it has an excellent partner.
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