The Culzean development
- Maersk Oil and its co-venturers are investing around £3 bn (USD 4.5 bn) in the Culzean development, with more than 50% committed to industrial investment in the UK. Over the projected life of the field, it is anticipated that £2.1bn (USD 3.3 bn) in operating expenditure will also be spent in the UK domestic market.
- Forecast plateau production is in a range of 300-450 million standard cubic feet per day of gas, which represents Maersk Oil equity production of 30–45,000 boepd.
- The field supports the UK’s transition to gas-fired electricity generation and is expected to support 6,000 UK jobs, and create more than 400 direct jobs.
- The project benefits from the UK’s HPHT Cluster Area Allowance, which supports the development of such projects – which typically have considerably higher capital costs – and encourages exploration and appraisal activity in the surrounding area.
- Maersk Oil UK (49.99%) is the operator of Culzean, with JX Nippon Exploration & Production (UK) Limited) (34.01%) and BP (Britoil Ltd) (16%) its co-venturers. It is located around 145 miles east of Aberdeen.
The UK approval is an important milestone in the Culzean project, which is part of Maersk Oil’s ambition to become a top-five producer in the North Sea. Discovered in 2008 by Maersk Oil and its co-venturers, including JX Nippon, the gas condensate field has resources estimated at 250-300 million barrels of oil equivalent.
Maersk Oil is looking for new long-term growth opportunities in the North Sea, investing heavily in projects and improving the efficiency of operations. Culzean is a natural gas field so helps diversify the company’s oil-dominated portfolio.
Production is expected to start in 2019 and continue for at least 13 years, with plateau production of 60,000-90,000 boe per day. It is the largest gas field sanctioned by the UK since East Brae in 1990, according to consultancy Wood Mackenzie.
“Culzean is an important development for the UK and also for Maersk Oil and our co-venturers. We are pleased the field will support UK economic growth as well as extend understanding of HPHT development,” said Maersk Oil CEO Jakob Thomasen.
“Culzean is the latest in a series of large investments by Maersk Oil in Denmark, Norway and the UK – reflecting our commitment to the future of the North Sea region and diversifying Maersk Oil’s portfolio.”
High pressure, high temperature
Challenges associated with developing the Culzean reservoirs include temperatures of up to 175C and high pressure that is equivalent to being 9 kilometres underwater, requiring specialised equipment that can handle the extreme conditions. This makes the project more capital intensive, with total investment expected to be about £3 billion, of which Maersk Oil’s share is about half.
“Today’s announcement sends a clear signal that the North Sea is open for business,” said the UK Chancellor of the Exchequer, Rt Hon George Osborne MP. “Already the UK’s oil and gas industry supports hundreds of thousands of jobs across the country and this £3 billion investment comes on the back of massive government support for the sector.
“Despite challenging times, this government has backed the oil and gas industry at every turn, introducing a vital package of support to help it to protect and create jobs.”
North Sea opportunities
The North Sea region has an estimated potential of 26–38 billion barrels yet to be discovered, according to national oil agencies, and it remains a technically attractive province for future development, provided costs and regulatory regimes continue to incentivise investment.
Maersk Oil has a share in Johan Sverdrup, one of Norway’s largest ever discoveries, and in the UK’s Golden Eagle, which started production in 2014. The Tyra Southeast expansion in Denmark has added production from a current asset. At plateau production, Culzean and these other projects will add about 90,000 boepd to Maersk Oil’s entitlement production.
“Sanction of this landmark project represents a major achievement and an exciting milestone for Maersk Oil UK,” said Morten Kelstrup, Maersk Oil UK Managing Director. “In particular today I’d like to congratulate the business unit for its outstanding delivery on portfolio development milestones, from discovery in 2008 to today’s government sanction.”