Teesside gas processing project to cost more
16 Jul 2012
Calgary, Alberta – Sterling Resources Ltd has increased the expected cost for phase 1 of the Breagh gas field development to £600-610 million – 6-8% above the figure previously estimated by the Canadian company.
The upward revision emerged as part of an ongoing review of the remaining work required at the Teesside Gas Processing Plant (“TGPP”) – where Breagh gas is to be processed. Sterling put its share of the cost increase at £10 to £13 million.
Preliminary estimates of costs and schedule to production start-up show a slight further increase in costs above the range indicated, the company said 13 July. Production start-up is expected towards the end of the fourth quarter of 2012.
The contractual date for mechanical completion of the TGPP works has not been achieved, Sterling reported. This it attributed to problems with repair of equipment damaged during shipment and the management of design of the works.
The increase also included costs relating to activities not connected to the TGPP work, such as completion of the onshore pipeline, completion of additional rock-dumping required on the offshore section of the pipelines and an estimate of increased drilling costs for future wells based on current rig rates.
As a result of the production delay, ongoing drilling and other costs from September (amounting to approximately £2 million per month) will now not be funded out of field cash flow, according to Sterling.
Early drilling results on the Breagh Alpha platform were reported as “positive” with the first wells, A-01 and A-02 (side-tracks of the original 42/13-3 and 42/13-5Z wells), both encountering a materially thicker than expected gas-bearing reservoir section.
These first two wells will be flow-tested within the next month, following which the first new well will be drilled from the platform. These three wells are expected to be on-stream at first gas, the company said.
