Business

Setback for North Sea project backed by Sage of Omaha’s firm

NORTH Sea-focused IOG has faced a setback in its efforts to bring a gas find made 20 years ago into production with backing from US billionaire Warren Buffett.

The company has said the start of drilling work on a well on the Southwark find has been delayed following technical issues with the remote operated vessel it planned to use on the development.

Chief executive Andrew Hockey said IOG still expects to be able to meet the revised timetable of mid-2022 for the start of production from Southwark.

However, he lamented: “It is very frustrating to have not yet spudded the first Southwark development well.”

News of the drilling hold up comes soon after IOG said the start of production from the Blythe and Elgood finds would be delayed while work continued on onshore facilities that will be used to handle the output from them.

It had hoped to start production from the fields in the final quarter of this year as part of a planned first phase development.

READ MORE: Surge in coal use boosts case for North Sea gas 

The delays experienced by IOG will deprive the firm of some of the benefit of the surge in gas prices recorded in recent months. In November IOG said the first phase looked set to capitalise on very strong gas prices whilst also providing timely new low carbon intensity UK domestic gas production.

However, IOG could still reap significant rewards for spotting the potential of gas finds that other companies had left undeveloped. Southwark was found by Conoco in 2000.

The company is developing a production hub to serve finds in the Southern North Sea, linked to a pipeline that it has renovated. In 2019 a company owned by Mr Buffet’s Berkshire Hathaway paid £40 million for a 50 per cent stake in the project and agreed to cover up to £125m of IOG’s costs.

IOG had formerly hoped to bring Southwark onstream in the second quarter of 2022. The company modified the timetable to mid-2022 after repairs were required on the rig it is using.

The rise in gas prices in recent months has been driven by a recovery in global demand for energy following the easing of lockdown measures. Market watchers have also cited factors such as a fall in UK production and moves by Russia to limit supplies to EU countries for political reasons.

READ MORE: North Sea firms to pay $1bn dividends after rise in oil and gas prices

Industry body OGUK noted last week that strong demand for gas in the UK in preceding days had been linked to low winds which reduced the output from wind farms.

Aim market-listed IOG was formerly known as Independent Oil & Gas.

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