HGS

We believe that maximising economic recovery (MER) will be best served by upstream and midstream operators working closely together to stimulate future investment, an approach that is aligned with the Oil & Gas Authority’s view that MER will be driven by right assets being in the right hands.

HGS will support our existing customers (Harbour Energy and Dana Petroleum) to develop the Tolmount Main field and enable further development of the Greater Tolmount Area. We are also keen to attract new customers who have potential developments in the surrounding area.

As such, every aspect of HGS has been planned to accommodate third party access, from the commercial structure and principles we have put in place to the infrastructure itself. The HGS platform and pipeline has been designed with overcapacity in mind and we have invested in additional risers and J-tubes, to enable lower field development and tie-in costs for future new customers.

Our forward thinking approach to HGS gives it the potential to become a future infrastructure hub that will enable production in this region of the North Sea to continue for decades to come.

Harbour Energy has a 50% interest in the Greater Tolmount Area along with Dana Petroleum, who hold the other 50% interest.

Harbour is the license operator and is responsible for the Tolmount Field Development Plan, licence and wells obligations, and is also the joint development operator coordinating the overall development and project management of both the HGS infrastructure and the Tolmount field.

Kellas Midstream and Dana will jointly fund, construct and own the HGS infrastructure in equal shares with Kellas assuming operatorship and having contractual responsibility to build, install, commission and operate the infrastructure. Kellas and Dana will also jointly fund some of the onshore modifications that are required at the Easington terminal.

Kellas has appointed ODE Asset Management Limited as Operating Partner for the HGS infrastructure. ODE will provide the resources to manage day-to-day operation of the HGS platform and pipeline.

The total development cost for the project is £530 million, with Kellas funding £175 million, Dana funding £265 million and Harbour funding £90 million. 50% of the project development cost is being invested in the UK with the platform, pipeline and terminal FEED engineering, and modifications to the Easington terminal being engineered and constructed by UK companies.

An Innovative Partnership

Premier (now Harbour) acquired its interest in the Greater Tolmount Area, which includes the Tolmount Main gas field, via its $120m acquisition of E.ON’s UK assets in 2016.

Premier’s objective was to maximise economic recovery via an area development solution balanced with a desire to reduce its upfront capital exposure. Premier looked at several ways of doing this, including farm out, vendor funding and infrastructure funding.

Ultimately, Premier selected a midstream joint venture which would build and own the infrastructure – the first time a greenfield UK pipeline and platform infrastructure has been funded by an infrastructure fund, but an extension of the financing models Premier deploys with its FPSO developments.

Premier, Kellas and Dana collaborated to develop an appropriate commercial framework as well as an appropriate risk-reward profile to ensure upstream and midstream investors were aligned.

In Q1 2021 Premier Oil merged with Chrysoar to become Harbour Energy.

This type of infrastructure partnership approach is unique and differs from the traditional upstream model where the operator funds both the field development and the infrastructure.

By putting in place innovative commercial agreements that enabled open discussion and encouraged information sharing, the HGS infrastructure ownership and operatorship was separated from the Tolmount Main field, significantly reducing Premier’s upfront capital exposure, allowing the project to be sanctioned as well as supporting the UK’s Maximising Economic Recovery (MER) policy as championed by the Oil & Gas Authority.

Prospective customers, who are interested in receiving terms and conditions specific to their development, should contact the Kellas Commercial Team at: info@kellasmidstream.com.