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    IOG pens gas sales agreement for North Sea fields

Summary

BP's marketing and trading unit will take IOG's gas share from the Saturn Banks gas project in the southern North Sea.

by: Callum Cyrus

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IOG pens gas sales agreement for North Sea fields

UK gas producer and infrastructure operator IOG said March 11 it had entered a new gas sales agreement (GSA) for its equity shares in three shallow water assets in the southern North Sea.

The GSA with BP's gas marketing subsidiary covers IOG's entire equity gas share from the Saturn Banks phase 1 development, which contains gas fields Blythe, Elgood and Southwark. The GSA will also supply gas from the Nailsworth and Elland blocks, which form phase 2 of the Saturn Banks project.

It replaces an earlier sales agreement signed with BP in February 2014 for the Blythe field.  Gazprom's marketing and trading unit previously held a GSA for Elgood and Southwark.

The Saturn Banks project targets a gross peak production rate of 140mn ft3/day, drawing on gross 2P gas reserves of 302bn ft3. IOG owns a 50% stake in both phase 1 and 2, while CalEnergy Resources holds the remaining 50%.

Gas will be sold on a day-ahead daily nomination basis, at prices linked to National Balancing Point, the UK's traded gas benchmark.  A hedging agreement for 50% of predicted output will be provided, subject to credit approval, in line with IOG's hedging strategy.

Saturn Banks Phase 1's launch had to be postponed in February due to stormy weather conditions, but IOG later confirmed backgassing at the Blythe and Elgood wells had begun March 4.

At Southwark, IOG is still working through regulatory and commercial processes to resume drilling, ahead of first gas scheduled in the third quarter of this year. 

The Southwark platform is located in water depths of around 43 ft, some 30 km east of the Blythe processing hub, and will be connected via a 6-km extension to the Saturn Banks pipeline.

IOG's CEO Andrew Hockey said the company was making "good progress in overcoming the necessary hurdles to resume safe drilling at Southwark over the coming weeks."

He added: "It is another very positive step for IOG to have this more comprehensive Gas Sales Agreement in place with a highly credible counterparty in BP Gas Marketing with whom we have enjoyed a long relationship already. In parallel, I can confirm that the backgassing and ready for start-up processes have been proceeding this week as planned."