LONDON (Alliance News) - Ithaca Energy Inc on Wednesday said it has secured access to a major oil export pipeline that will allow the company to transport future production from its Greater Stella Area development project in the UK North Sea, at a cost of around USD20.0 million.
Ithaca also said the floating production unit, which is already delayed, will leave the shipyard in Poland where it is being constructed either before the end of June or in early July to start making its journey to the field, which lies in the heart of the Central Graben area of the Central North Sea.
Importantly, Ithaca said first production from Greater Stella is still expected in September this year, but said on Wednesday it would occur to the back-end of that month.
The FPF-1 floating production unit is being constructed in the Remontowa shipyard in Poland by fellow London-listed oilfield services and engineering firm Petrofac Ltd, and the unit was delayed earlier this year due to problems during the commissioning phase of the unit.
Petrofac is earning an interest in the Greater Stella Area as part of its deal to construct and provide the vessel for the project.
On Wednesday, Ithaca said there is only a "limited number of commissioning activities" that need to be completed before the unit begins to make its journey to the North Sea.
"It is anticipated that the period from sail-away to first hydrocarbons will be approximately three months," said Ithaca.
The start-up of Greater Stella will be hugely significant for Ithaca as it will allow the company's overall production to more than double to 20,000 to 25,000 barrels of oil equivalent per day whilst bringing down its operating costs across its wider portfolio to below USD20 per barrel by the end of 2016.
Looking further into the future, Ithaca said it has secured access to the Norpipe oil pipeline system, a 350-kilometre pipeline running from the Ekofisk offshore production facilities on the Norwegian Continental Shelf to a dedicated oil processing facility at Teesside in the UK.
Ithaca plans to transfer from exporting oil from Greater Stella using a tanker to using the pipeline sometime during 2017, which it said will significantly improve the economics of the project further.
"This will significantly reduce the fixed operating costs of the Greater Stella Area facilities and enhance operational uptime, resulting in improved reserves recovery and increasing the long term value of the Greater Stella Area as a production hub," said Ithaca.
"In addition the company has taken advantage of the downturn in industry activity to secure attractive contracting terms, including a lump sum contract for the installation of the 44 kilometre pipeline required from the FPF-1 to the Norpipe system," the company added.
That work programme will need net capital expenditure of around USD20.0 million, Ithaca said, with "the majority" being paid in 2017.
Ithaca is holding its annual general meeting in Calgary, Canada later Wednesday.
Ithaca shares were trading up 4.1% to 67.67 pence per share on Wednesday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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