Hurricane Energy Restarts Lancaster Production after FPSO Shutdown

OE Staff
Wednesday, July 28, 2021

Oil production has resumed from Hurricane Energy's Lancaster field off the UK after the scheduled annual maintenance shutdown of the Aoka Mizu FPSO earlier in July.

"Production from the 205/21a-6 well is currently stabilizing, and a further update will be given in the Company's next monthly production release, which is scheduled for mid-August 2021," Hurricane Energy said.

Before the maintenance shutdown in early July 2021, the Lancaster field output from the P6 well alone was at 10,900 bopd with an associated water cut of 32%. The 23rd cargo of Lancaster oil, totaling about 530 Mbbls, was lifted in mid-June 2021.

Back in June, Hurricane Energy plc said it would face the business wind-down unless it managed to secure a shorter charter extension for the Aoka Mizu FPSO than originally agreed with the FPSO owner Bluewater.

Hurricane Energy, which started producing from the Lancaster field west of Shetland in 2019 using the FPSO, said it would not extend the charter of the Aoka Mizu FPSO for a period of three years from June 2022 to June 2025 "on current terms."  

However, Hurricane, which last year significantly downgraded Lancaster reserves estimate, said that it was open to a shorter FPSO extension. If a deal is not reached, this could lead to a wind-down of the company's business.

The three-year initial term of the bareboat charter expires in June 2022, "unless, by June 4, 2021, the company has exercised an option to extend for a period of three years, to June 2025."

"Based on the contractual terms for the three-year extension and the current Lancaster production forecasts, the company does not believe it is in the best interests of the Company and its stakeholders to exercise the option in its current form to extend the Aoka Mizu lease to June 2025, given the significant financial obligations this could entail. Accordingly, it has resolved not to do so," Hurricane Energy said Friday, June 4.

Still, the company said it remained in talks with FPSO owner Bluewater Energy Services over an alternative extension to the bareboat charter for a shorter period than three years.

"The company believes there is a reasonable prospect of negotiating such an extension of the existing contract on acceptable terms. However, there is no guarantee of an extension of the existing contract on acceptable terms. In such an outcome, Hurricane may need to pursue a controlled wind-down of its business and cease operations at the Lancaster field upon the expiry of the Bareboat Charter in 2022, at which point the field would be decommissioned," Hurricane said at the time.

To remind, Hurricane last year said the potential of its Lancaster field was much smaller than originally thought, and could not "support the level of debt in the company which was sized for a much larger Reserves and Contingent Resources base." 

Hurricane's unaudited estimate of 2C contingent resources in the Lancaster field was in 2020 reduced to 58 MMbbls remaining from 486 MMbbls in the 2017 CPR.

The estimated remaining Lancaster 2P Reserves were 7.1 MMbbls at December 31, 2020, based on future production from the 205/21a-6 well, the only producing well at the field.

While the talks over the terms of the extension are still ongoing, Bluewater is free to market its FPSO Aoka Mizu to other potential clients, with availability as of June 2022.

Bluewater may also agree terms with Hurricane Energy for a somewhat longer stay on the Lancaster location, a Bluewater spokesperson told Offshore Engineer via email last month.

Categories: FPSO Europe Floating Production UKCS

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