London-listed independent Hurricane Energy has made a final investment decision (FID) on the early stage development of its Lancaster discovery in the UK's west of Shetlands area.
The FID confirms an early production system capable of 17,000 b/d, which Hurricane has previously said will operate over an initial six-year period with the possibility of extending that out to 10 years.
Crude from Lancaster will be extracted on to the floating production, storage and offloading vessel Aoka Mizu, which is being towed to Dubai for an upgrade. Drilling will begin in the second quarter of next year. Lancaster remains on track for first oil in the first half of 2019, as Hurricane previously advised.
Hurricane has had a run of exploration success in the west of Shetland area, which has reinforced the region's growing significance to the UK's upstream sector. The most recent reserves estimate for Lancaster pegs "best estimate recoverable volumes" at 523mn bl. Hurricane's own estimate put recoverable resources at 593mn bl. The company has said an extension of Lancaster appears to have shown up through drilling at the Halifax prospect. It has called the Greater Lancaster Area "the largest undeveloped discovery on the UK continental shelf". Hurricane has flagged successful results from drilling at the Lincoln prospect, which in turn may be connected to the undrilled Warwick prospect.
West of Shetlands projects are more technically challenging than those in the North Sea, because of extreme weather and sea conditions, complex geology and a lack of infrastructure. But advances in technology and innovative development concepts have helped make them commercially viable, albeit expensive. Hurricane earlier this year raised more than $500mn towards funding the early production system at Lancaster, a relatively small amount when compared with the billions of dollars being spent in west of Shetlands. But most of this was committed before the oil price downturn in 2014, and this has begun to produce results.
BP in May started up a £3bn ($3.7bn), 130,000 b/d project to redevelop the Schiehallion and Loyal oil fields. Total last month started up production from a £1bn project to tie back the Edradour and Glenlivet fields to its £3.5bn, 90,000 b/d of oil equivalent Laggan-Tormore gas complex. The BP-led £4.5bn, 120,000 b/d Clair Ridge oil development is due on stream in 2018.
