THE chief executive of the Longboat Energy business founded by successful North Sea entrepreneurs has highlighted the uncertainty caused by the Cambo controversy in the UK as the firm ramped up its exploration efforts off Norway.
Longboat started drilling a well targeting multi-million barrel prospects as market conditions remained strong despite the spread of the Omicron variant.
The Brent crude price has risen in the first two days of this week following a holiday period that was marked by a dramatic surge in the number of Covid-19 infections around the world.
Brent crude traded up $1.03 per barrel yesterday afternoon, at $80.01/bbl, after gaining around $0.2/bbl on Monday.
The rise signals that traders are confident that Omicron will not derail the recovery in the market that has been fuelled by the rollout of coronavirus vaccines from late in 2020. Brent crude fell to an 18—year low of less than $20/bbl in April 2020 as the pandemic took hold.
Longboat has shown that some investors believe there is still lots of money to be made in the oil and gas exploration business.
The company was founded by members of the team that grew Aberdeen-based Faroe Petroleum into a significant North Sea player. Faroe was acquired by Norway’s DNO in 2019 following a hostile takeover bid that valued it at £640m.
Longboat said yesterday that it had started drilling operations on a well targeting the Ginny and Hermine prospects off Norway with Equinor. It reckons the prospects could contain more than 80 million barrels oil equivalent in total.
Noting that the well is at work on a seven-well programme off Norway, Longboat chief executive Helge Hammer said each has the potential to create “very significant shareholder value”.
He said Longboat is keen to grow in the UK as well as Norway, and thinks there are good exploration and production opportunities in both countries.
However, citing Cambo, Mr Hammer added: “We are worried about recent political comments/processes in the UK related to new oil and gas developments … which has created unnecessary uncertainty.”
He said its is essential for there to be a stable tax and regulatory framework.
The comments highlight the significance of the controversy generated by Shell’s plans to develop the giant Cambo find off Shetland with Siccar Point Energy. These were met with fierce opposition from environmental campaigners.
After chief executive Ben van Beurden defending the proposed development, Shell shocked the industry last month by announcing it had decided not to go ahead. It said then that the economic case for investment in the project was not strong enough and noted the potential for delays.
Longboat has focused exploration activity on Norway, which offers generous tax breaks to encourage activity. The Aim market-listed firm made three finds off Norway last year, including one which it described as a material oil discovery.
Drilling activity has been in decline in the UK North Sea for some time and fell to a record low last year. Firms cut discretionary spending in response to the fallout from the pandemic. This struck as the industry was emerging from the deep downturn triggered by the plunge in the crude price from 2014 to 2016.
Mr Hammer said Longboat was focused on finding good production opportunities in the UK, which could provide a tax-efficient way of investing.
Members of the Opec+ group of oil exporting nations reportedly agreed yesterday to continue easing curbs on production which they introduced in response to the drop in demand that followed the imposition of lockdowns.
Bjørnar Tonhaugen, head of oil market at the Rystad Energy consultancy noted: ”OPEC+ has grown confident that the market can take further increases in supply.
“Brent prices have recovered close to $80 after dropping below $70 in early December and real-time transportation data globally suggests there has not been any significant impact on oil demand thus far from Omicron.”