After a strong run heading into today’s announcement UK oil and gas play Hurricane Energy (HUR:AIM) its shares are actually down 0.4% to 58.8p as it announces first oil from its Lancaster field to the west of Shetland.
This shouldn’t disguise the significance of the news for the company and potentially the industry - this is the first time oil has been produced from a fractured basement reservoir in the UK.
The opening of an early production system (EPS) at Lancaster, using a floating production vessel, generated output at a rate of 20,000 barrels of oil per day over an initial 72-hour period.
The facilities will initially produce at around 45% capacity before increasing to 65%, translating as average production of between 9,000 to 13,000 bopd during this phase. After six months the EPS is expected to be running at 85%.
READ MORE ON HURRICANE HERE
AJ Bell investment director Russ Mould says: ‘A fractured basement reservoir is a body of rock beneath the earth formed more than two billion years ago. In certain places these massive structures - located deeper than the sandstones which have traditionally been the focus of oil exploration in the UK - have been pushed up and violently fractured by earthquakes and other tectonic forces.
‘The hydrocarbons discovered by Hurricane are contained within the cracks in these formations. Historically Yemen, Libya and Vietnam have successfully exploited fractured basement reservoir potential.’
Broker WH Ireland is impressed. ‘In our opinion, this represents a tremendous achievement for Hurricane and a remarkable milestone for the UK oil & gas industry, given this is the first commercial production of oil from a fractured basement field.
‘Nevertheless, the FPSO is simply operating as it was designed and the wells are simply behaving in line with expectations and their known capacity to produce oil. Likewise, the slow and steady ramp-up of production is very much, to our minds, a low-risk operational development.’
The market will get a further update from the company at a capital markets day in June.
