North Sea interests juniors

A British Government scheme designed to attract investment back into the once-booming North Sea fields is attracting the attention of oil and gas juniors in Western Australia.

Two Perth-based oil and gas explorers – Nido Petroleum and Elixir – have successfully applied for North Sea blocks under the UK Department of Trade and Industry’s (DTI) Promote licensing regime.

The successful program is stimulating interest by significantly lowering the financial and regulatory hurdles associated with oil and gas exploration in the UK.

Of the 58 companies offered licences in a recent Promote round of offers, 15 were potential newcomers to the North Sea, the British Government said.

The program was set up after the UK Government recognised the need to fully exploit the remaining potential of the North Sea oil and gas reserves.

Oil and gas majors have exited the North Sea in the past decade as reserves dried up and remaining sources no longer met their massive, long-life thresholds.

However, according to Nido Petroleum non-executive chairman Charles Morgan, exciting opportunities were still available under the Promote program to smaller players with lower economic thresholds.

“What makes sense for a small company doesn’t necessarily make sense for a big company,” he said.

Nido announced last week that, through its partners Corsair Petroleum and Stelinmatvic Industries, it had been offered two licences comprising three blocks in the 22nd round of the Promote program.

Nido said the two blocks offered to Stelinmatvic Industries contained a well that flowed 2 million cubic feet a day of gas on test when it was drilled. Nido has an option to acquire 100 per cent of these blocks.

The block offered to Corsair Petroleum, where Nido has an option to acquire a 50 per cent interest, also has a well with gas in it.

Nido says it plans to acquire 3D seismic data to assess the potential commerciality of the existing gas.

Perth-based Elixir recently floated on the back of oil opportunities it says are available in the North Sea, which are being created by the Promote program.

Elixir already has a stake in one North Sea promote licence through its UK-based partner, Granby Enterprises, and last week Granby was offered nine exploration blocks under five separate petroleum licence applications, also in the 22nd Licensing Round.

Mr Morgan applauded the Promote program and said that, under the UK’s normally stringent entry requirements for oil and gas companies, many wouldn’t gain access to the North Sea.

Plus, he said, Promote licence rental fees were also reduced to 10 per cent of the normal fees.

Mr Morgan said it was a positive outcome for companies and the UK Government.

While some companies would not move into production, he said they would develop oil and gas fields to a point where they were economic and then on-sell them to specific operators looking to get into production.

“They will do exactly as the Promote program is named, promote the region,” Mr Morgan said.

The Australian stock market also seems to have been excited by the program and the North Sea’s remaining potential.

Nido’s share price jumped almost 70 per cent, from 2.2 cents to 3.7 cents, following its announcement last week, while stock in Elixir has climbed to 41 cents after listing at 25 cents two months ago.

Edward Rigg, investment banker with Perth-based boutique investment bank Argonaut Capital, has been associated with both companies. Mr Rigg was a director of Nido before he resigned early this month. He was also co-founder of Elixir.