REG - Orcadian Energy PLC - 33rd Round Licence Awards

Orcadian EnergyAnnouncement

15/08/2024 07:00

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RNS Number : 4873A  Orcadian Energy PLC  15 August 2024

15 August 2024

Orcadian Energy plc

("Orcadian" or the "Company")

33(rd) Round Licence Awards

Orcadian Energy (AIM: ORCA) is pleased to provide an update on the status of
its three licence awards in the 33(rd) Seaward Licensing Round. Orcadian and
the NSTA have now entered into binding licence agreements for all three of its
licence awards.

33(rd) Round Licences:

·    Earlham Licence P2680 - Orcadian is licence administrator and holds
100% - containing an existing discovery, an exciting undrilled prospect and a
redevelopment opportunity

·    Mid North Sea High Licence P2650 - Orcadian is licence administrator
and holds 50% - containing shallow gas prospects and leads

·    Fynn Licence P2634 - Orcadian 50% interest - containing a very
substantial viscous and heavy oil discovery

 

Steve Brown CEO of Orcadian Energy said:

"We are really pleased to have the licence agreements in place for these three
new projects. As a result, we estimate that our contingent resource base has
grown to 228 MMboe with our un-risked prospective resource base now 100 MMboe.

"Our strategy has been to focus on the "post-transition" hydrocarbons - gas
and viscous oil.

"In a shallow water mature basin, almost by definition, the big fields with
great rocks and simple fluids have all already been developed, So, we
concentrate on reservoirs with great rocks, while innovating around how to
develop complex fluids.

"Our viscous oil projects will all benefit from our expertise in the
application of polymer flood technology. A combination of geothermal heat and
polymer could unlock the Fynn development which is a project of the same scale
as Rosebank.

"On the Mid-North Sea High, we have identified a number of shallow gas
prospects with the same characteristics as the A & B block gas fields that
have been successfully developed in the Dutch sector. Of course, as the
reservoirs are shallow the initial reservoir pressure is correspondingly
lower, so development of these gas fields starts with a need for gas
compression.

"The Earlham field has a high inert gas content, which has precluded
development to date, but the reservoir is proven and no further appraisal
expenditure is needed. We, with our industry partner, are confident we have a
solution to deal with the high level of inerts and beyond that, we believe we
will be able to deliver a reliable supply of near-zero emissions power to the
grid.

"Orcadian is no longer a one-trick pony. We have multiple pathways to success
and to deliver future value to our shareholders. The Earlham project, in
particular, demonstrates that our industry is capable of finding ways to
exploit our natural endowment of hydrocarbons to deliver real energy security
and emissions reductions."

 

The opportunities presented by these new licences are summarised below:

Earlham Licence P2680

The Earlham licence contains an existing discovery with a high inert gas
content (Earlham), an exciting undrilled prospect (Clover) and a redevelopment
opportunity (Orwell). The licence lies 100 km East of Bacton on the median
line with the Netherlands.

Earlham

The Earlham discovery was made by well 50/26b-6 drilled in 1995 by Talisman,
encountering gas in the Rotliegendes. This was then followed in 1996 by a long
horizontal combined appraisal and development well drilled by BP, intended to
be tested at up to 80 MMscf/day of gas. Both wells established that the
Earlham field has good permeability and that the wells will flow at commercial
rates without stimulation. No further appraisal is needed.

The test was curtailed, and the rate limited to 30 MMscf/day, when it was
established that the gas contained 49% CO(2) and 9% N(2). Taking that into
account, Orcadian estimate that the Earlham reservoir contains 114 bcf of
sales gas (methane) on a P50 basis. Our development concept entails an
offshore power station, to be connected to the grid (possibly via a wind farm
substation), with integrated CO(2) capture and storage. This concept would
deliver a stable and reliable supply of electricity with near-zero emissions.

 

This approach to off-spec gas development is entirely consistent with the
Prime Minister's national mission to make Britain a clean energy superpower
with zero carbon electricity by 2030. Orcadian will work with an industry
partner to progress development of this resource and intend to rapidly
progress the concept select process with NSTA to enable the earliest possible
project commitment.

Orwell

The Orwell field produced 309 bcf of wet gas from August 1993 to January 2009
when a subsurface safety valve failed. Given the very limited field life at
the host Thames complex, it was decided to decommission the field.  Orwell
had been developed with three wells and the pressure data confirmed that the
wells were connected to a Gas Initially in Place of 368 bcf. At abandonment,
the reservoir pressure was about 28 bar. If, by implementing suction
compression, it was possible to reduce the pressure to 10 bar, then up to a
further 38 bcf of gas could be produced. It is intended that a redevelopment
of Orwell will provide additional gas to be used to produce near-zero
emissions power in the offshore power station.

Clover

The licence also contains a compelling gas prospect which the Company has
named Clover. This is a four-way dip closure reservoired in Bunter sands,
analogous to the nearby decommissioned Orwell Field, which produced over 300
bcf of gas. Orcadian estimate that P50 recoverable prospective resources in
Clover amount to 153 bcf and the geological chance of success is estimated to
be 38%.

Orcadian is licence administrator and holds 100% of the licence. The SNS
licence covers blocks 49/25b, 50/21a, 49/30b and 50/26.

Mid North Sea High Licence P2650

The Mid-North Sea High ("MNSH") licence contains shallow gas prospects and
leads which contain up to 336 bcf of gross prospective recoverable resource on
a P50 basis.

The two largest leads - Glenlough and Breckagh - are estimated to have a
prospective resource potential of 131 bcf and 138 bcf respectively. These
prospects are analogous to the Block A and Block B shallow gas fields in the
Netherlands developed by Unocal and subsequently Chevron which came onstream
in 2007. Since then, the fields have been acquired by Petrogas who recently
brought two additional fields on stream to bring the total number of shallow
gas fields being produced up to six.

Any gas discovered could be used to power an offshore power station or could
be compressed and produced via the CATS line which has a nearby tie-in point.

Orcadian applied in partnership with Triangle Energy, an Australian listed
energy company. Orcadian is licence administrator and holds 50% of the
licence.

The Mid-North Sea licence covers blocks 29/16, 29/17, 29/18, 29/19, 29/21,
29/22, 29/23, 29/27 and 29/28.

Fynn Licence P2634

The licence contains a very substantial viscous and heavy oil discovery which
has a gross P50 contingent recoverable resource of 292 MMbbl, based upon the
latest operator estimates.

The Fynn licence is situated in the Outer Moray Firth and comprises blocks
14/15a, 14/20d and 15/11a. Orcadian (50% interest) together with the licence
operator Parkmead (50% interest), will leverage expertise gained in developing
viscous crudes to work towards commercialisation of Fynn Beauly, which is one
of the UK's largest undeveloped discoveries. This oil accumulation has been
proven by three wells and is estimated to contain most likely (P50) gross
contingent resources of 292 MMbbl, 257 MMbbl of which is on the licence; a
resource of the same scale as Rosebank.

The partnership will now begin to progress the approved three-year work
programme to work towards a technically and economically viable development,
that can be delivered within the context of the NSTA's Net Zero Strategy. By
undertaking geophysical, geochemical and reservoir modelling studies the work
will assess the feasibility of implementing polymer flooding with geothermal
heat uplift to improve recovery.

Why Viscous Oil Matters

The oil within the Fynn reservoir is viscous and made up of long chain
hydrocarbons, which means that when refined it contributes little to gasoline
supplies, but is a good feedstock for lubricants, asphalt and anode grade
petroleum coke (an essential component for fast charge EV batteries). Orcadian
believes that gas and viscous oils will be the post-transition hydrocarbons
essential to the prosperity of every economy.

Why Domestic Production is Best

Producing heavy oil domestically, under the stewardship of the NSTA, is a
considerably  better option than importing these oils from Venezuela or
Canada. Both these countries produce most of their heavy oil using thermal
means - steam assisted gravity drainage, cyclic steam stimulation or steam
flood. The measure of efficiency of all these techniques is the steam-oil
ratio, which is the number of barrels of cold-water equivalent of steam
required to recover a barrel of oil. An outstanding steam oil ratio is two,
but steam-oil ratios of four or five are common. The CO(2) emissions from
burning gas to generate the steam are approximately 30 kgCO(2)/bbl of water.
So, emissions per barrel from imports from Canada or Venezuela are typically
60 to 150 kgCO(2)/bbl, even before the transportation emissions are accounted
for. It is these high emission levels, and the strip mining and chemical
processing often used for extra-heavy oil extraction that have given heavy
oils such an undeserved reputation.

With a polymer flood approach, by incorporating heat from geothermal sources
to reduce reservoir oil viscosity, and by electrifying production systems
using green energy, the emissions per barrel in the production process can be
reduced to single figures, better than most UK light oil fields. The UK and
her allies need viscous oils both for strategic security of energy and for the
petroleum-derived products that support both the transition and the
post-transition economy.

Buying these products made from imported petroleum rather than our own oil
also damages the balance of payments, eliminates great jobs, and increases
actual greenhouse emissions.

In summary we are delighted to have the Fynn licence in hand and we are
committed to finding a way to produce this essential oil with the least
emissions possible.

Resource Summary

The award of these three licences has significantly boosted Orcadian's
contingent and prospective resource base, see tables below. The company now
has over 228 MMboe of 2C contingent resources and 100 MMboe of prospective
resources in high graded leads and prospects. About 14 MMbbl of these
resources relate to the Pilot field where Orcadian is carried through to first
offload of production from the development.

 

For further information on the Company please visit the Company's website:
https://orcadian.energy (https://orcadian.energy)

Contact:

 Orcadian Energy plc                                   + 44 20 7920 3150
 Steve Brown, CEO

 Alan Hume, CFO
 Zeus (Nomad and Joint Broker)                         +44 20 3829 5000
 Dan Bate / Alex Campbell-Harris (Investment Banking)

 Simon Johnson (Corporate Broking)
 Novum (Joint Broker)                                  +44 207 399 9425
 Colin Rowbury / Jon Belliss
 Tavistock (PR)                                        + 44 20 7920 3150
 Nick Elwes / Simon Hudson                             orcadian@tavistock.co.uk (mailto:orcadian@tavistock.co.uk)

 

 

Qualified Person's Statement

Pursuant to the requirements of the AIM Rules and in particular, the AIM Note
for Mining and Oil and Gas Companies, Maurice Bamford has reviewed and
approved the technical information and resource reporting contained in this
announcement.

Maurice has more than 34 years' experience in the oil & gas industry and 3
years in academia. He holds a BSc in Geology from Queens University Belfast
and a PhD in Geology from the National University of Ireland. Maurice is a
Fellow of the Geological Society, London, and a member of the Geoscience
Energy Society of Great Britain. He is Exploration and Geoscience Manager at
Orcadian Energy.

About Orcadian Energy

Orcadian is a North Sea focused, low emissions, oil and gas exploration and
development company. Orcadian may be a small operator, but it is also nimble,
and the Directors believe it has grasped opportunities that have eluded some
of the much bigger companies. As we strike a balance between Net Zero and a
sustainable energy supply, and petroleum-derived products, Orcadian intends to
play its part to minimise the cost of Net Zero and to deliver reliable energy
to the UK.

Orcadian's key asset is the Pilot oilfield, Pilot was discovered by PetroFina
in 1989 and has been well appraised. The field has excellent quality reservoir
and contains 263 MMbbl of a viscous oil ranging in gravity from 17º API in
the South of the reservoir to 12º API in the North. In planning the Pilot
development, Orcadian has selected polymer flooding and wind power to
transform the production of viscous oil into a cleaner and greener process.
Polymer significantly reduces fluid handling requirements and hence energy
consumption as well as boosting recovery. Ithaca Energy, operator of the
Captain field in the Inner Moray Firth, has enjoyed consistent success in
applying polymer flood to the highly analogous Captain field. Following the
recent farm-down of Pilot, the project is now under the stewardship of Ping
Petroleum UK PLC ("Ping") and is intended to be amongst the lowest carbon
emitting oil production facilities in the world.

Ping is progressing a low-emissions, phased, field development plan for Pilot
based upon a polymer flood of the reservoir, a Floating Production Storage and
Offloading vessel (FPSO) and provision of power from a floating wind turbine
or a local wind farm.

Orcadian has an 18.75% fully carried interest in licence P2244 (block 21/27a)
and a 100% interest in licence P2482 (blocks 28/2a and 28/3a). Ping is
operator of P2244 and the Pilot development project.

The Mid-North Sea High licence, P2650, contains shallow gas leads. Orcadian
applied in partnership with Triangle Energy, an Australian listed energy
company. Orcadian would be licence administrator and would hold 50% of the
licence. The Mid-North Sea High licence covers blocks 29/16, 29/17, 29/18,
29/19, 29/21, 29/22, 29/23, 29/27 and 29/28.

The Fynn licence, P2634, contains a very substantial heavy oil discovery.
About 88% of the resource on a best technical case is estimated to lie within
the area of the licence. Orcadian has a 50% working interest in the Fynn
licence, operated by the Parkmead Group. The Fynn licence covers blocks
14/15a, 14/20d and 15/11a.

The SNS licence, P2680, is held 100% by Orcadian, contains the Earlham
discovery, a low-calorie gas discovery with 114 bcf of methane resources on a
P50 basis, the Clover prospect which has P50 prospective resources of 153 bcf,
and the decommissioned Orwell field which has redevelopment potential,
alongside a number of smaller prospects.

Contingent Resources

 Asset                      Gross                                  Net                        PRMS sub-class           Phase & units         Commercial risk factor  Licence
                            1C           2C           3C           1C           2C     3C
 Pilot*                     58.4         78.8         110.5        9.8          13.6   19.7   Development pending      Oil, MMbbl            100%                    P2244

Source 2
 Pilot periphery            5.9          9.8          17.6         1.1          1.8    3.3    Development unclarified  Oil, MMbbl            80%                     P2244

Source 2 & 7
 Elke Main §                26.0         45.5         94.9         25.7         45.0   94.0   Development on hold      Oil, MMbbl            79%                     P2482

Source 3
 Narwhal                    4.3          9.2          17.6         4.2          9.1    17.4   Development on hold      Oil, MMbbl            79%                     P2482

Source 1
 Fynn (Beauly)              175.6        292.3        480.6        77.3         128.6  211.5  Development unclarified  Oil, MMbbl            25%                     P2634

Source 5 & 7
 Lowlander & Midlander      17.5         11.6         31.9         8.8          5.8    16.0   Development unclarified  Oil, MMbbl            15%                     P2634

Source 6 & 7
 Orwell                     4.2          5.2          6.3          4.2          5.2    6.3    Development unclarified  Gas, MMboe            50%                     P2680

Source 8
                            25.0         31.0         38.0         25.0         31.0   38.0   Gas, bcf
 Earlham                    12.5         19.0         29.0         12.5         19.0   29.0   Development unclarified  Gas, MMboe            67%                     P2680

Source 4
                            75.0         114.0        174.0        75.0         114.0  174.0  Gas, bcf
 Total contingent resources                                                     228.2                                  Oil & gas, MMboe
 Total contingent resources factored by commercial risk                         106.2                                  Oil & gas, MMboe

 

 

Prospective Resources

 Asset             Gross                      Net                    PRMS sub-class  Phase & units         Geological risk factor  Licence
                   Low      Best     High     Low      Best   High
 Elke Main - West  13.0     22.8     47.5     12.9     22.5   47.0   Prospect        Oil, MMbbl            90%                     P2482

(3C outline §)
Source 3 & 7
 Elke Updip        5.5      17.5     39.0     5.4      17.3   38.6   Prospect        Oil, MMbbl            87%                     P2482

Source 1
 Elke Area 2       4.2      12.3     25.4     4.2      12.2   25.1   Prospect        Oil, MMbbl            64%                     P2482

Source 1
 Clover            13.8     25.5     45.3     13.8     25.5   45.3   Prospect        Gas, MMboe            38%                     P2680

Source 4
                   83.0     153.0    272.0    83.0     153.0  272.0  Gas, bcf
 Glenlough         12.0     21.8     36.7     6.0      10.9   18.3   Lead            Gas, MMboe            31%                     P2650

Source 4
                   72.0     131.0    220.0    36.0     65.5   110.0  Gas, bcf
 Upper Breckagh    3.3      5.5      9.2      1.7      2.8    4.6    Lead            Gas, MMboe            55%                     P2650

Source 4
                   20.0     33.0     55.0     10.0     16.5   27.5   Gas, bcf
 Lower Breckagh    9.5      17.5     30.3     4.8      8.8    15.2   Lead            Gas, MMboe            20%                     P2650

Source 4
                   57.0     105.0    182.0    28.5     52.5   91.0   Gas, bcf
 Total prospective resources                           99.9                          Oil & gas, MMboe
 Total risked prospective resources                    59.5                          Oil & gas, MMboe

 

 Source
 1       Sproule CPR 2021
 2       Sproule CPR 2021 - equity updated
 3       Sproule CPR 2021 - management modified
 4       Orcadian management estimate - Licence application to NSTA
 5       Operator estimate - as presented to NSTA
 6       Operator - earlier Relinquishment Report & Licence Application - both for
         NSTA
 7       Orcadian management estimate of risk factor
 8       Orcadian management estimate

 Notes
 *       Pilot field net resources include a reduced revenue interest of 10% until the
         carry is repaid
 §       Elke high case is limited to the 2C outline as we have reclassified the 3C
         extension as the Elke Main West prospect

 

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