Norway's BW Offshore Agrees to Search for Oil in U.K.'s North Sea

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Researched by Industrial Info Resources (Sugar Land, Texas)--BW Offshore (Oslo, Norway) recently signed a Letter of Award (LOA) with Premier Oil for a floating production, storage and offloading (FPSO) vessel that will meet requirements to operate in the Catcher Oil Field in the U.K.'s North Sea. The LOA will be converted into a final contract, subject to partner sanction and approval from the Department of Energy and Climate Change. It is expected to be completed late in the second quarter of this year.

According to a company statement, the total value of the contract is $2.3 billion. It is expected to cover 10 years--seven years in the contract, with a three-year option. BW Offshore's scope includes the delivery of the FPSO and the mooring system, and the installation and operation of the unit throughout the charter period. The FPSO will have a processing capacity of 60,000 barrels of oil equivalent per day and a storage capacity of 650,000 barrels per day.

The company will order a newly built hull from Japan for the project, while conversion and integration work will be performed in Singapore. The FPSO is expected to be ready for production in mid-2017. The project will be financed by a project-specific bank facility, which will provide $800 million, and company's own resources.

Plans involve the development of 92 million barrels of oil equivalent through the subsea tie-back of the Catcher, Varadero and Burgman fields to an FPSO. The fields are owned by Premier Oil (50%, operator), Cairn Energy (30%) and MOL (20%). The project is expected to begin producing oil in mid-2017, and it should ramp-up to a peak 50,000 barrels per day by late 2018.

Premier has budgeted $1.6 billion in gross development capital expenditures up to the first oil produced, and an additional $650 million over an expected field life of 10-plus years; this would imply development costs of $24.5 per barrel of oil equivalent. It also includes about 30% of allowances and contingencies for both weather and cost escalation. The U.K.'s allowance for small field shelters 150 million pounds (US$249.43 million) of taxable profits from the supplementary charge. This saves 32% in taxes for each of the three fields, as they all have P50 reserves.

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