North Sea gas firm Kistos has said it is ready to sanction two west of Shetland fields, Glendronach and Edradour West.
But their development hinges on an agreement with French operator TotalEnergies.
Both fields are in the Greater Laggan Area (GLA). Kistos acquired a 20% stake in the assets last year, more than doubling its net daily production, in a deal worth more than £132 million.
Meanwhile, Kistos executive chairman Andrew Austin has criticised new taxes on the industry in Europe, including the UK Government’s energy profits levy (EPL).
He said they were “difficult to comprehend”, given greenhouse gas emissions associated with imported hydrocarbons “are typically much higher than those associated with those produced locally”.
Tax ‘instability has ‘significant implications’ for energy security
Mr Austin added: “This tax instability has already resulted in Kistos and companies with international asset portfolios cancelling or scaling back North Sea projects and diverting capital elsewhere, with significant implications for local energy security of supply.”
Announcing 2022 results, Kistos said the projects on Glendronach and Edradour – named after whiskies – would take advantage of an allowance made available through the EPL. The levy includes a 91% return on investment for new developments.
Kistos expects development of Edradour West to start by the end of the year. A final investment decision (FID) on Glendronach is anticipated in the second half of 2023.
FID doldrums
Glendronach, 20 miles east of the Laggan field, has been in FID doldrums for some time.
An exploration well was drilled there in 2018, unveiling what was hoped to be a 175 million-barrel discovery. But an appraisal the following year cut resources by 40%.
It was originally proposed as a tie-back to the nearby Edradour field, which started up in 2017, but “high levels of mercury” found at the gasfield forced a change of plan.
TotalEnergies recently put out a contract for the supply, construction and commissioning of a subsea tie-back to the Shetland gas plant for Gelndronach.
Kistos said a decision by the joint venture partners on the order and timing of developments would be taken later in 2023 to allow further technical reviews, with the aim of reducing costs.
TotalEnergies has a 40% stake in the GLA, alongside partners Kistos (20%), Ineos Exploration and Production UK (20%) and a RockRose Energy subsidiary (20%).
Alternative Investment Market-listed Kistos said pre-tax profits totalled £217.2m last year, compared with losses of £63.8m in 2021.
Revenue up more than four-fold
Revenue in the latest period came in at £356m, up more than four-fold from about £77.4m previously, thanks to higher commodity prices and a boost to production from the company’s participation in the GLA.
Mr Austin said the London-based company, with interests in the UK, Netherlands and Norway, boasted a “diversified and flexible portfolio across multiple jurisdictions”.
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