Lancaster oilfield


The Lancaster oilfield is an offshore oil field in United Kingdom territorial waters west of Shetland and north of mainland Scotland in water depths of around. It comprises licence blocks 205/21a, 205/22a, 205/26b and 205/22b in Licence P1368, all of which are fully owned by Hurricane Energy. It is the first naturally fractured basement oilfield in the United Kingdom Continental Shelf to reach production. Testing to date has exceeded expectations and productivity indexes have been described as "world class". Production costs for 2020 are forecast to be $20 per barrel and are expected to fall to $17/bbl and perhaps as low as $15/bbl in 2021 as production ramps up.

History

Exploration well 205-21-1A was drilled in 1974 by Royal Dutch Shell. It discovered light oil in naturally fractured Precambrian age granitic basement but was plugged and abandoned.
In 2009, Hurricane Energy drilled well 205/21a-4 much deeper into the naturally fractured basement and discovered a substantial column of light crude oil with 38° API and a flow rate of of oil per day. Subsequently, a sidetrack well, 205/21a-4Z, was drilled in 2010 which flowed light oil at of oil per day. The 205/21a-4 well was plugged and abandoned. The 205/21a-4Z well was suspended.
Well 205/21a-6 was drilled in 2014. This included a one kilometre horizontal section. It produced a natural flow rate of of oil per day. This increased to per day with an electric submersible pump. Both figures were constrained by surface equipment capabilities and it was reported that the well could deliver per day with a modest 120psi drawdown under production conditions. The well had a very high productivity index of 160 stb/psi/d. It was suspended as a future producer.
Well 205/21a-7 was drilled in 2016 and produced of oil per day with an ESP. It was subsequently sidetracked as 205/21a-7Z to include a one kilometre horizontal section. This produced a natural flow rate of of oil per day or per day with an ESP, both of which were constrained by the test equipment used, and a very high PI
of 147 stb/psi/d. It too was suspended as a future producer.

Early Production System

In 2016, Hurricane committed to an Early Production System using the Aoka Mizu Floating production storage and offloading vessel, chartered from Bluewater Energy Services, for an initial six-year period with an option to extend to ten years. This will be used to generate revenue and evaluate the reservoir properties over an initial testing period expected to take 6 to 12 months followed by a production period for the remainder of the duration. The results of the initial testing will inform decisions regarding potential full field development. The EPS utilises wells 205/21a-7Z and 205/21a-6. Revenue generated from oil sales will help to fund further activities in the Lancaster Field and the adjacent Halifax, Warwick and Lincoln fields.

Reserves, contingent resources and initially in place volumes

The Competent Persons Report published by RPS Energy on May 8, 2017 provided the following estimates of reserves, contingent resources and initially in place volumes;
These estimates will be re-assessed during 2020 and 2021 taking account of the findings from the Early Production System. In July 2020, Hurricane announced that the prospective resources might be materially downgraded as a result of experience with the Early Production System. An updated Competent Person's Report is expected to be published before the end of the first quarter of 2021. A futher update is expected to be issued with Hurricane's interim financial results in September 2020.

First oil

The Aoka Mizu FPSO arrived at the Lancaster field on 17 March 2019. Two days later, it was successfully hooked-up to the turret mooring system buoy. On 11 May 2019 hydrocarbons began flowing into the processing system of the Aoka Mizu. Following a 72-hour production test during which the planned production rate of of oil per day was achieved, a press release announcing first oil was issued on 4 June 2019. When announcing first oil, Hurricane Energy forecast that production for the first three months would be of oil per day and per day for the following three months giving a combined average of of oil per day for the first six months with production being constrained by testing activities.

Testing phase

This phase involves testing the two production wells individually and together. Early test results exceeded expectations. Substantially higher flow rates and PIs
were demonstrated.
Each of the two production wells flowed at more than of oil per day without the need for ESP assistance. The natural flow rates were 211% higher than previous tests for the 205/21a-6 well and 153% higher than previous tests for 205/21a-7Z.
Well 205/21a-6 demonstrated a PI of 205 stb/psi/d and well 205/21a-7Z demonstrated a PI of 190 stb/psi/d.
Production from first oil until the end of 2019 averaged of oil per day which was 20.9% higher than was forecast when first oil was announced. Production in 2020 was expected to be of oil per day, planned as per day at 85% uptime, which includes allowances for operational downtime and shut-ins for potential tie-ins and/or de-bottlenecking. This was subject to review based upon the results of the ongoing testing phase.
The horizontal sections of the two wells are a few hundred meters apart and the natural fracture network is such that they effectively behave as a single well. Various combinations of flow rates were tested across the two wells including periods where one or both wells were shut in.
As production continued, the water cut in the 7Z well steadily increased. Although the horizontal section of this well is hundreds of meters long, the current production interval, which is near the heel of the well, coincides with a fracture containing what is currently believed to be perched water. As a result, Hurricane decided to shut in the 7Z well and test the 6 well by itself. Hurricane is considering options to relocate the production interval of the 7Z well away from the zone of perched water but any such scheme, which would require a drilling rig, is unlikely to take place during 2020. As a result of these issues, Hurricane has withdrawn production guidance for 2020.
In July 2020, Hurricane announced that ESPs had been commissioned on both wells and that production from the 7Z well had recommenced delivering a combined production of around 15,000 bopd.
Hurricane Energy is continuing to test and analyse the reservoir properties and expects to update its assessment of the Lancaster Field during 2020. This might materially reduce the prospective resources. Subsequently, an updated Competent Person's Report is expected to be published in the first quarter of 2021.

Future Activities

The Oil and Gas Authority has required that Hurricane Energy spuds at least one additional sub vertical well before 22 December 2021 in order to further establish the size of the Lancaster Field. In addition, consideration is being given to drilling another production well. If this happens, it would be tied back to the Aoka Mizu FPSO. As a result of the Covid-19 pandemic, this date was extended by one year.
Design work to link the Aoka Mizu FPSO to the West of Shetland Pipeline is ongoing. This will enable surplus natural gas to be transported to Sullom Voe Terminal in the Shetland Isles of Scotland for processing rather than being flared.
The production capacity of the Aoka Mizu is forecast to increase to of oil per day in 2022, planned as per day at 87.5% uptime. Some of this capacity is currently intended to be used for the adjacent Lincoln oilfield, in which Hurricane Energy has a 50% stake, pending full field development of that asset.
A full field development final investment decision for the Lancaster Field depends on the outcome of the Early Production System test phase. This may involve a farm-out or could be undertaken by Hurricane Energy itself.