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    US Renews UK Rhum Sanctions Waiver


The field's operator Serica is eyeing acquisitions this year, despite some operational setbacks.

by: Joe Murphy

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US Renews UK Rhum Sanctions Waiver

London-listed Serica Energy reported on January 21 that it had received a renewed waiver from US sanctions for its Rhum gas field, where it partnered with the Iranian Oil Company.

The waiver had been due to expire on February 28 2021 but has been renewed until January 31 2023. It will allow operations and production from the Rhum field to continue unaffected, Serica said. The previous extension was only 16 months long.

Rhum is the third biggest gas producer on the UK shelf, accounting for 5% of national production. Serica bought its 50% stake in Rhum and shares in the nearby Bruce and Keith fields through a series of acquisitions deals in late 2018 with BHP Billiton, BP, France’s Total and Japan’s Marubeni.

Serica also issued an operational update, reporting 23,800 barrels of oil equivalent/day of average production in 2020 from its interests in the Bruce, Keith, Rhum and Erskine fields, down from 30,000 boe/d in 2019. Output last year would have been 27,000 boe/d, Serica said, but was hit by the shutdown of the Bruce platform in late January for a month and a half of repairs.

The cutback in production resulted in the company's operating costs rising to $14/boe in 2020, from $12.6 boe/d in 2019. The company meanwhile sold its oil and gas at an average of $20/boe. Serica's cash balance is healthy, it said, with no borrowings and limited decommissioning liabilities. It is looking forward to a boost in its net cash flow from Bruce, Keith and Rhum from 60% to 100% on January 1 2022, under agreements with the fields' previous owners.

Serica began intervention work in October at the R3 well at Rhum, which was drilled by BP but was never put into production. But it has run into difficulties. The company previously delayed the work's completion until late January because of poor weather conditions and problems with rig equipment.

"The remove of the 2005 completion is taking longer than anticipated due largely to the unexpectedly poor condition of the equipment being recovered from the well," Serica said on January 21, warning that operations were now expected to run into March.

Serica's 50%-owned Columbus field is on track to start production in the fourth quarter of 2021, it said, noting that the Maersk Resilience rig which will drill its development well was due on hire before the end of March. Production is expected to gross 7,000 boe/d, of which 75% is gas.

The company is eyeing acquisitions this year, but said it would take care not to overextend itself.

"These firm foundations and strong balance sheet allow us to continue to seek opportunities to grow our portfolio through investment and M&A activity," CEO Mitch Flegg said in a statement. "Serica will not overpay in order to quickly grow our portfolio. We are focused on identifying value rather than volume and will continue to look for the right opportunities where Serica can utilise its skills to add value to assets that no longer fit the objectives of the current owners."