A unique and innovative partnership formed by Kellas Midstream, Premier Oil and Dana Petroleum has been instrumental in unlocking investment and enabling the development of the Tolmount Main field.
The Tolmount Main field is located in the Greater Tolmount Area. Discovered in 2011, it is one of the largest undeveloped gas fields in the Southern North Sea and is expected to produce around 500 billion cubic feet of gas, with peak production up to 300 million standard cubic feet per day. The HGS/Tolmount partners put in place innovative commercial agreements whereby the ownership and operatorship of the Tolmount gas field is separate to that of the HGS infrastructure. Kellas Midstream and Dana Petroleum will jointly fund, construct and own the HGS infrastructure, with Kellas assuming operatorship.
Premier is the joint development operator, coordinating the overall development of both HGS and the Tolmount Main field.
The Tolmount Main field will produce via the HGS platform and a tariff will be paid to the infrastructure owners for gas transportation, adjusted based on the volumes delivered.
The HGS/Tolmount project was sanctioned by the joint venture and infrastructure partners in August 2018 and the partnership went on to win a Maximising Economic Recovery (MER) UK Award at the 2018 Oil & Gas UK awards in recognition of its contribution to maximising economic recovery in the UKCS.
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Tolmount Main field discovered in 2011
Expected to produce around 500 billion standard cubic feet of gas per day
Peak production up to 300 million standard cubic feet of gas per day
Total development cost £530 million; 50% UK spend
The HGS infrastructure will comprise a new minimal facilities platform with six-slot well template and helideck access, and a new 48 kilometre, 20 inch diameter gas export pipeline.
The HGS pipeline has capacity to accommodate 300 million standard cubic feet of gas per day and will connect to the existing Rough processing facilities at Centrica Storage Limited’s Easington terminal in East Yorkshire, where some modifications are being undertaken to enable it to receive and process gas from Tolmount.
New reception facilities are being built for HGS (a pig catcher and emergency shutdown valve arrangement), which will then tie into the Rough slug catchers.
The HGS topsides and jacket contract was awarded to Rosetti Marino in Italy, and the HGS pipeline contract was awarded to Saipem.
Investment in additional risers and J-tubes enables lower field development and tie-in costs for future projects, giving HGS the potential to become a material future infrastructure hub and enable production to continue in this region of the North Sea for the next 20 years and beyond.
Minimal facilities platform with six-slot well template
48 kilometre, 20 inch diameter gas export pipeline
Pipeline capacity 300 million standard cubic feet of gas per day
Connection to Easington terminal, East Yorkshire
Premier has a 50% interest in the Greater Tolmount Area along with Dana Petroleum, who hold the other 50% interest.
Premier is the license operator and is responsible for the Field Development Plan, licence and wells obligations, and is also the joint development operator coordinating the overall development and project management of both the HGS infrastructure and the Tolmount field.
Kellas Midstream and Dana will jointly fund, construct and own the HGS infrastructure in equal shares with Kellas assuming operatorship and having contractual responsibility to build, install, commission and operate the infrastructure. Kellas and Dana will also jointly fund some of the onshore modifications that are required at the Easington terminal.
Kellas has appointed ODE Asset Management Limited as Operating Partner for the HGS infrastructure. ODE will provide the resources to manage day-to-day operation of the HGS platform and pipeline.
The total development cost for the project is £530 million, with Kellas funding £175 million, Dana funding £265 million and Premier funding £90 million. 50% of the project development cost is being invested in the UK with the platform, pipeline and terminal FEED engineering, and modifications to the Easington terminal being engineered and constructed by UK companies.
Operator: Humber Gathering System Limited (wholly owned by Kellas Midstream)
Owners (equity): Kellas Midstream (50%), Dana Petroleum (50%)
Operating Partner: ODE Asset Management
Upstream Join Venture: Premier Oil (50%), Dana Petroleum (50%)
Licence Operator & Joint Development Operator: Premier Oil
Premier acquired its interest in the Greater Tolmount Area, which includes the Tolmount Main gas field, via its $120m acquisition of E.ON’s UK assets in 2016.
Premier’s objective was to maximise economic recovery via an area development solution balanced with a desire to reduce its upfront capital exposure. Premier looked at several ways of doing this, including farm out, vendor funding and infrastructure funding.
Ultimately, Premier selected a midstream joint venture which would build and own the infrastructure – the first time a greenfield UK pipeline and platform infrastructure has been funded by an infrastructure fund, but an extension of the financing models Premier deploys with its FPSO developments.
Premier, Kellas and Dana collaborated to develop an appropriate commercial framework as well as an appropriate risk-reward profile to ensure upstream and midstream investors were aligned.
This type of infrastructure partnership approach is unique and differs from the traditional upstream model where the operator funds both the field development and the infrastructure.
By putting in place innovative commercial agreements that enabled open discussion and encouraged information sharing, the HGS infrastructure ownership and operatorship was separated from the Tolmount Main field, significantly reducing Premier’s upfront capital exposure, allowing the project to be sanctioned as well as supporting the UK’s Maximising Economic Recovery (MER) policy as championed by the Oil & Gas Authority.