Orcadian Energy (ORCA), the low-emissions North Sea oil and gas development company, is pleased to provide the following
- The Company has submitted a draft Field Development Plan for the Pilot oilfield to the North Sea Transition Authority (NSTA)
- A structured farm-out process has been initiated for the Pilot oilfield
- New tax regime has transformed economics of North Sea investment for tax-paying companies.
Orcadian has 79MMbbls of 2P reserves in the Pilot oilfield and the Pilot oilfield Field Development Plan ("FDP") builds upon work done in the concept select process which culminated in NSTA sending a "letter of no objection" to the low-emissions concept selected by Orcadian, as announced on 1 December last year.
Orcadian's proposed low emissions, FDP for Pilot is based upon a Floating Production Storage and Offloading vessel (FPSO), with thirty-four wells to be drilled by a Jack-up rig through a pair of well head platforms and provision of power from a floating wind turbine. Emissions per barrel produced are expected to be about an eighth of the 2020 North Sea average, and less than half of the lowest emitting oil facility currently operating on the UKCS. On a global basis this places the Pilot oilfield emissions at the low end of the lowest 5% of global oil production. The draft FDP will be discussed and agreed between NSTA and Orcadian over the coming months but it cannot be approved until the associated development finance has been finalised. The structured farm out process, that has been initiated for Pilot, is a key part of that process.
At the same time, the Directors understand that the introduction of the Energy Profits Levy ("EPL") by the UK Government last month, has radically improved the economics of a farm-in deal for some potential farminees. Whilst the EPL did introduce a further tax on profits from UK oil and gas companies, it also introduced significant investment allowances to encourage oil and gas companies to reinvest their profits to support the economy, jobs and UK energy security. Accordingly, for companies that pay both EPL and UK ring fence corporation tax (a modified form of corporation tax only payable by the UK oil and gas industry), the after-tax cost of development could be reduced by up to 75% when compared with a non-tax paying company. The Board believe that this will make investment in the development of the Pilot oilfield an increasingly attractive opportunity.
There is more information on the workings of the UK ring fence tax system, and the impact of the EPL, available in a Treasury briefing note here: https://bit.ly/Treasury_EPL
Steve Brown, Orcadian's CEO, said:
"Submission of the draft FDP is a further important milestone for the Pilot development and highlights the maturity of the project. Our focus on minimising emissions means that the project will be especially attractive to companies that wish to drive down their emissions intensity whilst the introduction of the investment allowances as part of the Energy Profits Levy will surely incentivise operators to double down on investing in domestic energy security. We look forward to a heightened level of interest in our project and providing further updates as the process progresses."