"Choosing your partners is crucial in the modern North Sea," says John S. Woods, VP development and operations at Ithaca Energy, one of the up and coming independent oil and gas companies on the UK Continental Shelf.
BP, Shell and Total are still the biggest names. But as UK production slows (it dipped by 9% in 2006) the majors are seeing a future in more promising regions, and are reducing their North Sea presence. Smaller companies, content with lower margins, are moving in to fill the gap - taking over aging installations and acquiring licenses for much smaller fields than any major would be willing to develop. Today 150 different companies hold licences on the UK Continental Shelf.
It's only been three and a half years since Ithaca Energy was founded in Calgary, Alberta with the purpose of establishing itself in the North Sea. Now the independent oil and gas operator is looking like it is one of the ones that could be voted "most likely to succeed."
John Woods, VP development and operations, has lofty goals for Ithaca, focusing on keeping high ownership in new developments. "Our driving force is to stay high and to operate. We believe we can bring forward developments more quickly and more effectively than larger companies in the UK," he says.
After initially acquiring a number of UK Continental Shelf licenses and building its exploration and development asset portfolio, the company floated its stock in June 2006, and has seen a rise of more than 50% in share price since then. On November 30, Ithaca announced that it had acquired Talisman Energy's 100% interest in the Beatrice oilfield for £10 million.
First production
In addition to Beatrice, which will bring immediate production of approximately 1,800 bopd when complete transfer is planned in June 2008, the company has three developments, and establishing production from them will be a major milestone. The Jacky field, where Ithaca has a 90% stake, is expected to see first oil at the end of 2008, and will tie in to the Beatrice platform. Ithaca has brought DNV onboard to support the Jacky field development.
Success in the North Sea, says mr Woods, is based on several factors.
"Effective funding allows you to do everything else," he says, noting that Ithaca is very well funded in comparison with many competitors. "Our ethos is that we believe we need to control the assets that weÕre a part of," he says. "We believe in the control of our own destiny."
Control is one thing, guts is another. "You have to have the courage to drill," mr Woods says. "We have a board of directors who back our technical guys with the drill bit."
Mr Woods joined Ithaca Energy in 2006 with 25 years of experience in petroleum engineering and development management, including 13 years at Amerada Hess. He has several "firsts" in his career in North Sea production, including leading the Amerada Hess project to conduct the first well workover using a wireline intervention vessel in 1992.
Mr Woods says the biggest risk mitigation is done in choosing who works for you, and who your partners are. Having partners, says mr Woods, is not merely valuable in order to share risk. "It actually gives you a discipline, which is very valuable. We've established partners who want to make things happen."
Overlooked prospects
High-quality technical work gives the company an edge. "We believe we can find prospects that others have overlooked," says mr Woods.
That is what happened with the Athena discovery. It was previously owned by Talisman Energy, but lay undeveloped, as Talisman deemed it marginal, and below their metrics.
Ithaca saw the opportunity, acquired the licence and did the geological surveys. However, Talisman stands to gain from the project, as the subsea tie-back will go to their platform.
"They weren't going to drill it - we did," says mr Woods. "That's one of the joys for me about working at Ithaca. There is no cumbersome gate process. If I want to develop Athena, it's up to me to make the right development plan, get it funded from the board, and then deliver it."
Talisman's footsteps?
Talisman Energy is the prime example
of an independent upstream oil and gas operator to enter the changing UK market, growing in its 10 years there to become a new UK major. Mr Woods says Ithaca is planning on staying lean, and with 14 current employees, there are no plans for more than 24 in the next couple of years.
The next step for the company is to become a production operator, which will happen with Beatrice next year. He says in the new North Sea market, the skills are no longer the domain of the big producers. "Best practice is now with the contractors," says mr Woods.
"There has been a worry that the small companies will lead to a degradation of standards. What we've seen is exactly the opposite. We're willing to go to the people who actually have most competence. The actual quality still sits in the North Sea," he says. "It's just not owned by the majors."
TEXT AND PHOTO: Kaia Means
Date: 2008-02-11