Shell UK Ltd. and Egdon Resources PLC will work on a program and timeline for two UK offshore licenses to secure license extensions from the Oil & Gas Authority (OGA) following Shell’s agreement to farm-in and assume operatorship.
Shell UK Ltd. has signed a farm-in agreement with Egdon for interest in P1929 and P2304, which contain the Resolution and Endeavour gas discoveries respectively.
Egdon subsidiary, Egdon Resources UK Ltd., currently holds a 100% interest in both licenses. Under terms of the agreement, Shell would acquire a 70% working interest in and become operator of both licenses. In return, Shell will pay 85% of the costs of the acquisition and processing of a 3D seismic survey covering both the Resolution and Endeavour gas discoveries with the carry on the acquisition costs capped at $5 million gross, beyond which it would pay 70% of the costs. Shell also will pay 100% of all studies and manpower costs up to a well investment decision on the licenses.
The farm-in is conditional upon approval from the Oil & Gas Authority and agreement of a mutually acceptable forward work program and timeline with the OGA.
Extensions were granted by the OGA to Egdon in 2019 to May 31 subject to securing a farm-in agreement by Jan. 31 and by demonstrating by March 31 that the licenses are on track to deliver a future program of 3D seismic data acquisition across both licenses. Egdon and Shell will now engage with the OGA to agree the nature and timing of the forward work program which will enable further license extensions to be granted.
A report prepared by Schlumberger Oilfield UK PLC in April 2019 reported Mean Contingent Gas Resources of 231 bcf, with a P90 to P10 range of 100-389 bcf, attributable to the Resolution gas discovery (P1929). The Resolution discovery was made by Total in 1966 when well 41/18-2 flow tested gas from the Permian aged Zechstein carbonate (limestone) reservoir. Egdon estimates that the Endeavour gas discovery (P2304) contains Mean Contingent Resources of 18 bcf, with a P90 to P10 range of 10-28 bcf.
Mark Abbott, managing director of Egdon Resources said the immediate focus will be to agree on a forward work program and timeline for the licenses with the OGA. The first part of the work program, he said, will be the acquisition of a marine 3D seismic survey to enable a decision on the contingent appraisal well.