North Sea firm aims to bring gas field into production amid Ukraine war fallout

A NORTH Sea firm that won backing from US billionaire Warren Buffett is set to ramp up production in the area as the UK looks to reduce its reliance on imports amid the fallout from the war in Ukraine.

IOG said it is on track to start production from the Southwark field in the fourth quarter of this year after overcoming a range of operational challenges.

The company is currently producing gas from two fields it brought onstream after Russia launched its assault on Ukraine.

The start of production from the Blythe and Elgood fields in March allowed IOG to capitalise on the surge in gas prices seen in recent months. The increase was fuelled by the recovery from the pandemic and gained renewed momentum after Russia attacked Ukraine in February.

Jonathan Wright at IOG’S house broker finncap noted that production from Blythe and Elgood has stabilised at strong rates. This has left IOG generating significant cashflow.

The performance provides vindication for the company’s decision to invest in finds that had been left undeveloped by other firms for years.

In 2019, IOG won backing for the plan from the Calenergy Resources business owned by Mr Buffett’s Berkshire Hathaway. Calenergy paid £40m to acquire a 50 per cent stake in the project and agreed to cover £125m related costs.

Southwark forms part of the first phase of the development planned by IOG.

IOG had hoped to bring Southwark onstream in the second quarter of 2022.

It faced technical issues with the remote operated vessel it planned to use on the development. Drilling work was interrupted as a result of unfavourable seabed conditions.

The company said it expects to start appraisal drilling on two other finds, Goddard and Kelham North/ Central, in the fourth quarter. If the appraisal work is successful the fields may be included in later phases of IOG’S development.

Shares in the former Independent Oil and Gas closed down 1.3p at 32.7p on the Aim market.