IOG, Heerema agree to innovative funding arrangement for North Sea hub platforms

Independent Oil and Gas (IOG) has signed a letter of intent (LoI) with Heerema Fabrication Group for up to four normally unmanned platforms for the Blythe Hub and Vulcan Satellite Hub gas developments in the UK southern North Sea.

The LoI covers front-end engineering and design (FEED) and engineering, procurement, construction, and installation (EPCI) of the platforms. Both parties expect to sign a full contract for these services before year-end.

FEED work will precede a final investment decision (FID) on the project, targeted by the end of the first quarter 2018. IOG’s goal is for the FEED costs to be fully deferred and the EPCI costs to be 50% deferred until first gas, significantly reducing its funding requirements for the project.

Mark Routh, CEO and interim chairman, said: “FEED will start immediately with a view to adapting an established UK southern North Sea design previously built by Heerema Efficient platform fabrication and installation will be critical to the successful and timely development of our two gas hubs, and Heerema represents the best technical and commercial solution to achieve this.

“Our commercial model aligns the incentives of all project participants towards the efficient delivery of IOG’s substantial gas resources and the intended cost deferral will contribute significantly to funding the portfolio into production.

“We look forward to finalising the contract with Heerema and agreeing similar terms with other key contractors to continue implementing our gas hub strategy for the undersupplied UK market.”