Serica Energy has hit a snag with the drilling of a high-impact North Eigg exploration well off the UK due to rig equipment failure, and the operations are now expected to take six weeks longer than originally expected. According to Serica, the 'extremely frustrating' technical delay won't have an impact on the ultimate geological outcome of the well, but will increase costs.
Back in mid-July, Serica said that operations had kicked off on "the high-impact and potentially transformational" North Eigg exploration well.
The gas prospect is located close to Serica’s operated fields and infrastructure and is estimated to contain 60mmboe (P50) and potentially over 236 mmboe (P10) of recoverable resources (both unrisked), and, according to Serica, shares many geological similarities with the adjacent Rhum field.
Serica is using the Transocean Paul B. Loyd Jr. harsh environment semi-submersible drilling rig at the site. The rig dayrate is $160,000. The well results had been expected in October 2022, but this will now be delayed.
"Drilling operations on the North Eigg exploration well have encountered delays and, following a recent equipment failure and the required mobilization of a replacement, operations are now expected to take some six weeks longer to complete than the original schedule," Serica Energy said Wednesday.
"Operations had been progressing successfully despite some drilling delays in the top-hole sections. During recent preparations for drilling the third section of the well there was a failure of a vital piece of rig equipment during routine pre-job testing. A replacement has been sourced, and planning is underway to transport this to the drilling rig," the company said.
"This will have no impact on the ultimate geological outcome of the well and it is expected that all well costs will benefit from the Investment Allowances available under the recently introduced Energy Profits Levy," the company said.
Serica's net well cost after tax is anticipated to increase by approx. £3 million as a result of the delays, and it is now expected that results from the well will be available in December 2022.
Mitch Flegg, Chief Executive of Serica Energy, said:"This high-impact exploration well is the latest in a series of capital investment projects undertaken by Serica with the objective of increasing our production in an environmentally sensitive manner. This program is designed to help increase the UK's security of supply and reduce its reliance on imports.
The technical delays encountered on this project are extremely frustrating but do not impact either the chance of success or the significant prospective volumes of this exploration prospect."
Serica has previously said that, in case of success at the North Eigg, the discovery could be developed as a tie-back to the nearby Serica-operated and 98% owned Bruce facilities. Tying back to Bruce would minimize development emissions, reduce the overall carbon intensity of the Bruce facilities and extend infrastructure life, the company said in July.