Alpha Petroleum Resources Limited (“Alpha Petroleum” or “Alpha”), an upstream oil and gas operator focused on the UK sector of the North Sea and backed by private equity firm Petroleum Equity, has entered into a Front-End Engineering and Design (FEED) study agreement with Teekay Offshore Partners L.P. (Teekay Offshore) for its Varg Floating Production Storage and Offloading (FPSO) unit. Alpha intends to use the FPSO for the development of the Cheviot oil field. Cheviot is 100 per cent owned by Alpha Petroleum and is one of the largest undeveloped oil fields in the UK sector of the North Sea.
Alpha has also entered into an Exclusivity Agreement with Teekay Offshore and during FEED will negotiate a Lease and Operate contract for the entire expected life of the Cheviot oil field. Alpha expects to achieve sanction for the development during Q3 2017 and is targeting first oil production in 2019 at an expected rate of at least 30,000 barrels per day.
The Cheviot development programme will consist of a minimum of 18 wells: 13 production wells, two water injection wells and two gas injection wells. It also includes one production well established in the satellite Peel oil reservoir. Options exist to use additional processing capacity on the Varg FPSO, which will be considered during the FEED process. This would allow for infill wells to increase ultimate recovery. Development of the Cheviot field is predicated upon rigorous evaluation of historical production data and new 3D seismic surveys. Alpha Petroleum has concluded that maximum recovery would be achieved via re-injection of produced gas and water and use of horizontal wells to minimise drawdown.
Andy Crouch, Alpha Petroleum's Executive Chairman, commented: “This is a key milestone in the development of the Cheviot field and follows innovative thinking and continued investment during a downturn in the market. Teekay Offshore has a strong track record of operational excellence in the North Sea, and we are very pleased to see their commitment to this project.
“Alpha's collaborative approach with contractors has resulted in a project that is economically robust in a low oil price environment, minimises our delivery risk and time to first oil and meets the UK Government's MER requirements. We are focused on creating long-term value by bringing Cheviot to production and building a hub around the Cheviot field to unlock further upside in nearby undeveloped discoveries.”
Teekay Offshore's Varg FPSO was selected for its ability to meet all of the project's requirements, which include minimal Cheviot-specific modifications; minimal FPSO work to meet the anticipated 10-year project life; and being a proven, reliable North Sea FPSO – Varg has an average 98 per cent availability record.
Alpha Petroleum is backed by Petroleum Equity, an alternative investment firm established in 2012 to address the significant lack of alternative capital providers focused on upstream oil & gas investment opportunities outside North America. Petroleum Equity's senior industry team has deep and specialist expertise in oil & gas investments, with an average of 27 years' experience in the sector.