London-listed Union Jack Oil (LON:UJO) announced this morning an increased economic interest in licences PEDL180 and PEDL182 of the Wressle hydrocarbon development project in Lincolnshire, bringing the company’s interest in the development to 40%. UJO is a main partner in the project, alongside operator Egdon Resources (LON:EDR), which owns a 30 percent interest, and Europa Oil & Gas (LON:EOG) with another 30 percent.
The joint venture has an estimated 500 bopd of gross initial production, of which 200bopd are net to UJO. The project has been considered financially robust, generating significant cash flow for UJO, as break-even full-cycle economics is estimated at an oil price of US$17.62 per barrel. First oil is expected during H2 2020.
The licence for Wressle operations was granted based on the benefits it will bring to the local community. In his decision, government planning inspector Phillip Ware said to the BBC: “The proposal would deliver economic benefits and reduce the need for imported fuel. I give great weight to these and other benefits. In particular, the proposal would make a significant contribution towards the provision of secure energy supplies and be consistent with the use of a mix of energy sources during the transition to a low-carbon economy.”
Oil and gas provides more than 75 percent of the UK’s total primary energy, according to data from Oil and Gas UK, further noting that as oil and gas will still provide two-thirds of total primary by 2035, it therefore needs to be seen as a vital component of an energy policy.
In 2019, the UK recorded a 10% increase in electricity imports to meet its energy demand last year, said a report from energy market analysis firm EnAppSys. The energy industries’ contribution to the UK economy in 2018 were 3.2% of GDP, nearly 10% of total investment and 32.6% of industrial investment. Of the energy total in 2018, oil and gas extraction accounted for 34%, up 4.2 percentage points on the previous year.
The oil market has slowly gathered momentum in May. Oil prices have rebounded in the recent weeks, recovering from the lows of April amid optimism about economic activity pick-up after easing of lockdown measures and OPEC+ reaching supply cut agreements.
About Wressle Development project and UJO
Located in Lincolnshire, Wressle is one of Union Jack’s three flagship assets, along with West Newton and Biscathorpe, which are part of the company’s strategy to focus on major projects to deliver growth in reserves, production and asset value.
The oil produced at Wressle would also help offset international oil imports typically shipped over long distances, as the oil produced would be refined nearby in Immingham, keeping trucking and transportation to a minimum, reducing the carbon footprint and greenhouse gas emissions.
Beyond providing benefits on energy supply, Wressle development will bring economic benefits to the region, with a boost in employment and opportunities for the community. Wressle plays a part in the Economic Growth Plan for North Lincolnshire, which champions the growth of the Humber chemical and energy cluster that currently contributes around £6 billion to the UK economy.
Local industries include petrochemicals, commodity and speciality chemicals, composite materials, pigments and paints, wind turbines and pharmaceuticals, and a raft of other associated industries employing circa 15,000 people in at least 120 companies. Petroleum remains fundamental to these locally significant industries, including in the manufacture of items such as wind turbines for the renewable energy sector which rely upon composite materials involving petroleum products, as do many industrial applications.
Union Jack’s other assets have also been generating positive news. West Newton in East Yorkshire covers 176,000 acres and could represent the largest UK onshore oilfield discovery in decades, after revealing a significant liquid and gas development opportunity with two hydrocarbon discoveries. Following approval from the Environmental Agency, well testing has commenced at West Newton A-2 and work is already in progress at West Newton B-1 drill site.
Biscarthorpe has a break-even full cycle estimated at US$18.07 per barrel of oil, and the company management believes that Biscathorpe remains one of the largest conventional un-appraised onshore hydrocarbon prospects in the UK.
Oil & Gas industry to increase green credentials
The need for lower greenhouse emissions has called for a restructuring of the oil & gas industry. In recent developments, Oil & Gas UK, the UK’s upstream industry body announced its commitment to halving the sector’s greenhouse gas emissions by 2030, and to a further 90% by 2040.
Onshore assets are pivotal in this transition, as it is estimated that power generated at offshore platforms can be four to five times more CO2-intensive than energy from the national grid, counting for 60 percent of the total sector’s carbon emissions. Locally sourced and produced oil can significantly reduce the industry’s carbon emissions by cutting transport and decreasing the need for imported energy sources
One of the main domestic oil fields is at Wressle, in Lincolnshire. The oil produced at Wressle will help offset international oil imports typically shipped over long distances, as the oil produced would be refined nearby in Immingham. Wressle is scheduled to deliver its first oil in a few months and has an estimated 500 bopd of gross initial production.
Zac Phillips, Business Development Advisor at Union Jack Oil, which owns 40% of the Wressle field, says: “The oil from Wressle is going to a local refinery so the greenhouse gas impact is going to be significantly lower than it would be than if the refinery in Immingham took its crude from Saudi Arabia or even the North Sea.”
“It is important that domestic oil is consumed preferentially over imported oil so that the economic benefit of this domestic oil is kept within the UK. We have to put Wressle in the context of the overall supply security balance, and Wressle will play its part.”
Another domestic asset, West Newton, also owned by Union Jack Oil, is considered to be the largest oilfield discovery in the UK in recent decades, and has proven to have even higher green credentials. A recent study by the well-known GaffneyCline consultancy concluded that the West Newton hydrocarbon project’s carbon intensities are significantly lower than the UK average and compared to other onshore analogues.
David Bramhill, Executive Chairman of Union Jack commented: “This study is an excellent overview of the green credentials for any future development decision at West Newton. The AA rating achieved indicates the efforts made by the Operator, Rathlin Energy (UK) Limited to ensure that projects under its stewardship comply with best practice. Union Jack and Reabold Resources Plc support Rathlin’s strategy to negate the effects and threat of climate change. Union Jack`s growth strategy is aligned with our Carbon Management Practice for all of our development projects in the future in order to achieve significantly lower carbon intensities than the industry average.”
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