OGA lays out recommendations in capacity dispute between Spirit, Neptune

The UK oil industry’s regulator has advised Spirit Energy to keep looking for alternative export routes for its Pegasus project after the path to its first choice was blocked.

The Oil and Gas Authority (OGA) found “various communication breakdowns” between Spirit and Neptune Energy and published a number of recommendations.

Spirit said it had already identified a number of options and was working towards a final investment decision on the Pegasus project.

Spirit initially wanted to produce Pegasus gas via the Cygnus platform in the southern North Sea.

The firm has a majority stake in the Cygnus field, with a 61.25% working interest.

But Neptune Energy operates the installation, despite having a smaller share in Cygnus, at 38.75%.

In 2017, both parties agreed general terms for Pegasus to export gas to Cygnus via a subsea tieback.

Pegasus is thought to be capable of yielding around 15 million barrels of oil equivalent.

Neptune later realised the Cygnus field’s performance was better than expected.

It believes the installation does not have enough capacity to accept gas from Pegasus, at present.

The regulator said the companies should “carry out significant work on improving collaborative behaviours”.

The OGA also recommended that the Cygnus partners should come up with a strategy which identifies “third-party gas opportunities” for the next five years.

They should also work on technical solutions to remove the current “blockers” to the Cygnus installation’s ability to take in gas from other nearby fields.

If all parties decide Cygnus is the best option for Pegasus, Spirit and Neptune should iron out the kinks in the original heads of terms agreement.

The OGA also said Spirit and its partner on Pegasus – Halo Offshore – should keep working to “identify and evaluate alternative export options”, while uncertainty over Cygnus’ capacity remains.

Gerry Harrison, Spirit Energy’s Executive Vice President of Non-Operated UK Production said: “We note the OGA’s announcement of findings under its non-binding dispute resolution process and thank them for reviewing the matter so swiftly.

“We believe strongly in the future development of Pegasus and have identified several potential alternative export routes. We are continuing to asses these options in order to progress to a final investment decision on the Pegasus West field as soon as is reasonably practicable.”

A spokesman for Neptune said: “We welcome the OGA’s involvement in the process and their findings and look forward to aligning with all stakeholders around the positive recommendations made.

“We will continue to collaborate with our partners and others in support of the strategic objectives of MER UK.”

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