North Sea operator Orcadian (AIM:ORCA) has agreed to farm out a 50% stake in a sub-area of its Earlham and Orwell developments to Marine Low Carbon Power Company (MLCP).
The deal was signed for $2.2 million with $1.4m payable on completion.
MLCP aims to use gas from the sites to power onshore battery projects and its Mobile Offshore Generating Unit (MOGU) product with incorporated carbon capture and storage.
The MOGU fits a gas turbine to the development to produce what Orcadian described as “carbon free energy”. This power is then exported back to shore via subsea cables.
Steve Brown, Orcadian CEO, commented: “The development of Earlham is intended to be the first of a number of MLCP led zero carbon energy projects which will integrate gas-to-wire and carbon capture and storage technologies to provide zero carbon balancing power which is desperately needed if the United Kingdom is to meet its net zero obligations.”
© Orcadian EnergyEarlier this year Orcadian announced that it had found a farm in partner for its Earlham Southern North Sea project.
Earlham has a methane resource of 114 billion cubic feet (bcf), Orcadian believes, and Orwell is set to add an additional 31 bcf.
Ashley Kelty, Panmure Liberum director and oil and gas research analyst, described the move as a “good deal” for Orcadian as it looks to move ahead with its Pilot project which Ping Petroleum farmed in to this year.
“It affrays the development cost and offers further upside alongside the core Pilot development,” Kelty wrote.
Ping now owns a controlling 81.25% interest in licence P2244, which contains the Pilot field, while Orcadian retains the remaining 18.75% stake.
Orcadian has no requirement to fund the pre-production development project work programme and will retain its stake in the Pilot licence to the first offload of oil produced from the field.
Brown added: “These projects are designed to proceed without requiring any government subsidy since MLCP will sell power directly to customers who value reliable, carbon free electricity which is available when renewable energy is not available or in short supply.
“There is no need to create a business model for CO2 storage nor to rely on government to sanction financial support for the project. This should enable an early commitment to the Earlham development.”
Orcadian unphased by scope three ruling
Due to plans to capture carbon dioxide at the site and the use of the MOGU system, Brown believes that Earlham will align with the UK government’s carbon-slashing goals.
Recently there has been greater focus on downstream, or scope three, emissions that come from oil and gas developments.
This comes after a landmark UK Supreme Court ruling earlier this year which raised questions regarding downstream emissions associated with oil and gas production.
The ‘Finch Case’ followed a decision by Surrey Council to extend drilling permission for an onshore oil well at Horse Hill, near Gatwick Airport.
Campaigner Sarah Finch challenged the council’s approval, arguing the council should have to consider the emissions created from the oil’s end use.
© Image: Friends of the EarthIn a three-to-two ruling, the Supreme Court decided in favour of Ms Finch and said the council’s decision to approve the oil well without consideration of Scope 3 emissions in its environmental impact assessment (EIA) was unlawful.
As a result of this, UK heavy hitters Shell and Equinor have found themselves in court defending their Rosebank and Jackdaw developments.
However, downstream emissions are not something that concerns the Orcadian boss.
He said: “Earlham will be the first gas field on the UKCS to be dedicated to a facility that will capture practically all the emitted carbon dioxide for storage underground.
“Scope 3 emissions will be less than 5% of a conventional gas development which supplies an unabated power station. ”
Orcadian’s loan from Shell
MLCP is a joint venture company owned by IPCNWE and Richmond Offshore Energy.
As part of the deal, IPCNWE parent company Independent Power Corporation (IPC) has acquired the loan advanced by Shell to Orcadian in 2019.
As a result, Orcadian is now set to fork out $1.5 million to IPCNWE and parent company IPC.
However, IPC agreed to convert greed to convert US $1.4m into funding “part of the consideration for MLCP to acquire its 50 per cent stake in Earlham and Orwell,” Orcadian wrote in a stock market update.
The remaining $100,000 of the loan has been exchanged for an Orcadian loan note, dated 30 June 2026. This can be exchanged for 312,500 shares in the North Sea operator at a price of 25p per share.
This comes soon after Shell divested its UK oil and gas assets into an independent joint venture project with Equinor, a move which marked the end of the supermajor’s time as a UK operator.
Orcadian M&A
Recently, Orcadian acquired the shares of HALO Offshore UK Ltd from the joint liquidators of Hague and London Oil plc (HALO).
HALO previously held several licences in the Southern North Sea, including in the Pegasus and Andromeda fields and the depleted Schooner field.
The firm does not currently hold any licences after it collapsed in 2022, leaving shareholders as much as £18 million out of pocket.
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