InfraStrata plc (AIM:INFA), the independent petroleum exploration and gas storage company, is pleased to provide an operational update on its Northern Ireland and Southern England projects.
Petroleum exploration project
As announced in July 2014, InfraStrata, together with joint venture partners Brigantes Energy Limited (“Brigantes”) and Terrain Energy Limited (“Terrain”), entered into an option agreement with Larne Oil and Gas Limited (“Larne”) with respect to acquiring licence interests in onshore Northern Ireland licence PL1/10 and adjacent offshore licence P2123 (the “Agreement”). The Company is pleased to announce that Larne has exercised that option.
Larne is a wholly owned subsidiary of Larne Basin Exploration LLC, a recently formed U.S. based investment company set up for the purpose of investing in oil and gas exploration in the Larne Basin, Northern Ireland.
Under the terms of the Agreement, Larne will fund a disproportionate share of the forthcoming costs for the proposed Woodburn Forest-1 exploration well to a total depth of 2,000 metres in licence PL1/10 to earn a 50% interest in the licence. Should the well cost exceed the Authorisation For Expenditure (“AFE”) by more than 10% then all partners would pay their respective percentage share of such excess. However, InfraStrata has pre-existing farmout agreements with partners Brigantes and Terrain with respect to the Woodburn Forest-1 well, which mean that any excess cost accruing to its interest in the well would still be carried.
Woodburn Forest-1 will be the first exploration well on the licence area since 1971 and will evaluate a prospect with three conventional sandstone reservoir targets in the Triassic, Permian and Carboniferous. Combined Prospective Resources for the Triassic and Permian reservoirs have been estimated by the joint venture at 40 million barrels of oil.
In P2123, Larne will also be assigned a 50% interest and will at completion of the agreement reimburse its share of certain costs to existing partners. Ardent Oil Ltd, a UK oil exploration company, is working in partnership with Larne and will be providing technical support to the project.
Subject to the approval for the licence interest assignments by Department of Enterprise, Trade and Investment (“DETI”) for licence PL1/10, and Department of Energy and Climate Change for licence P2123, the licence interests in both PL1/10 and P2123 will be as follows:
|Brigantes (40% owned by InfraStrata)
|*net InfraStrata 27.5% interest
Islandmagee gas storage project
The project company, Islandmagee Storage Limited (“IMSL”), a joint venture between InfraStrata (65%) and Mutual Energy (35%) has been progressing plans in recent months to drill the Islandmagee-1 well to a total depth of approximately 1,700 metres. This well is a data gathering well which will core the Permian salt and enable the project front-end engineering design to be completed.
Project development commenced in 2007 with the acquisition of 3D seismic data to image the Permian salt in the Larne Lough area. During 2012, planning permission was granted for the project and a gas storage licence was issued by the Utility Regulator. A wellsite was constructed in 2013. During 2014, a sub-surface agreement for lease was signed with The Crown Estate and all other land rights required for the project were secured. Also during 2014, the project was granted draft marine licences by the Department of Environment for the offshore elements of the project. Final licences cannot be issued until the composition of the Permian salt is verified via the Islandmagee-1 well.
In October 2013, the gas storage project was granted a ‘Project of Common Interest’(“PCI”) status by the European Commission. PCI status means recognition by the European authorities that the Islandmagee gas storage project brings benefits not only to the Member State in which it is located, but to a much wider area. It confirms the importance of the project at a European level. PCI status also means that the project must be given priority and quick passage by relevant Member States in the permitting process, and cooperation in its development. Importantly, projects of common interest can apply for significant financial support from the European Union – this may be in the form of direct grant or other forms of financial backing from institutions such as the European Investment Bank. In August 2014, IMSL submitted an initial application to the European Commission for a grant to support the drilling and evaluation of the Islandmagee-1 well (grant available for up to 50% of the anticipated expenditure). A decision on this grant funding is anticipated in late 2014.
In order to save on the total costs of drilling it is planned to drill the Islandmagee-1 well in Q1 2015 as part of the same drilling programme as the Woodburn Forest-1 oil and gas exploration well, subject to being granted a Consent to Drill by DETI, and IMSL completing the remainder of the funding.
Infrastrata is pleased to announce that Anita Gardiner will be joining the InfraStrata team from BP Gas Marketing (“BPGM”) in October 2014. Anita will be appointed as a Director of IMSL, and will manage the gas storage project, a role she undertook previously when BPGM were involved in the project for two years until January 2014. Anita will be based in Northern Ireland and also manage the stakeholder engagement for the petroleum exploration project.
InfraStrata and IMSL are planning public information events during November to provide further information to the public on each of the planned wells and allow the project teams to address any questions that may arise.
Petroleum exploration project
InfraStrata (60%) and its joint venture partners, Corfe Energy Limited (22%) and Brigantes Energy Limited (18%), in the P1918 offshore licence have modified their plans for development of the project. The planned California Quarry-1 to target oil and gas within conventional Jurassic sandstone and limestone reservoirs needs to be directionally drilled from its onshore location for a distance of 600 metres to access licence P1918. In our Interim Results in April, the Company explained that the petroleum licence that included the area of the onshore site had been recently relinquished. Since it is necessary for the area from which a well is drilled to be held under a petroleum licence, either by InfraStrata or by a third party, the joint venture group will apply for a licence over the required area as part of the UK 14th Landward Licensing Round. With the Round closing at the end of October the partners do not expect awards will be granted to enable the well to be drilled within the window of September-March inclusive, a condition of the planning permission. Therefore plans for the site construction and drilling have been postponed and will not now take place this coming winter. The terms of the P1918 Licence require a well to be drilled before February 2016, leaving time for drilling next winter.
Ongoing farmout discussions with third parties are continuing. Further technical work is being undertaken on the “98/11-3 Prospect”, within a fault block immediately to the south of the giant Wytch Farm oilfield. This was tested in 1989 by Gas Council (Exploration) Ltd. The well encountered a 10.5 metres vertical oil column in the Sherwood Sandstone with an oil-water-contact at a depth of 1,739 metres sub-sea. Reservoir quality is very similar to that observed in Wytch Farm. InfraStrata intends to re-process two offshore 3D seismic surveys acquired over the prospect area during 1992 and 1999 and undertake Pre-stack Depth Migration to better image the structure. InfraStrata and partners believe there is considerable potential (greater than 50 million barrels of recoverable oil) structurally higher than the 98/11-3 well within the prospect. It is anticipated that the prospect will be sufficiently defined by the data re-processing to enable a decision to be made during 2015 on drilling a new exploration well on it.
InfraStrata is planning a public information event during late October to provide further information to the public on its exploration plans and allow the project teams to address any questions that may arise.
Commenting on the operations update, Andrew Hindle, CEO of InfraStrata said:
“Northern Ireland will be the focus of the Company’s activities this coming winter, as progress is made to drill two wells. We are very pleased to be progressing the drilling of the Woodburn Forest-1 exploration well in Northern Ireland with Larne as a joint venture partner. InfraStrata will continue to manage the joint venture as Operator but will work closely with the Larne team which brings many years of oil and gas investment and technical experience in the U.S., the North Sea and Europe together with a strong investment base.
At Islandmagee, the Company, with its Northern Ireland energy infrastructure partner Mutual Energy, continues to make progress towards drilling the Islandmagee-1 well which, subject to completing funding will be drilled in Q1 2015. This will be a key milestone towards making the creation of a gas storage facility a reality.
Gas storage and oil and gas exploration, if successful, would be strategically important for energy security, infrastructure investment and the wider economy in Northern Ireland, whilst also providing wider benefits for the rest of the UK and Ireland. At present, 100% of Northern Ireland’s oil and gas is imported. In Northern Ireland oil and gas accounts for 91%1 of total final energy consumption. This includes 61%1 of all electricity generation (where flexible gas fired power generation is particularly important to support intermittent renewable power generation).
We are very pleased to welcome Anita Gardiner. She will be a key member of the InfraStrata team based in Northern Ireland at a time when the projects move into a more active period.
In Dorset, the short-term goals have been modified with the focus for the next year on the evaluation of a prospect where oil was encountered in a well drilled in 1989, located less than 2 kilometres from the edge of the giant Wytch Farm oilfield.”
1: source: Department of Energy and Climate Change for years 2011-12.