British firm buying into Orcadian’s North Sea assets, with eyes on ‘zero carbon energy’ development

UK-headquartered oil and gas player Orcadian Energy has inked two deals with compatriot power developer and operator of power plants, the Independent Power Corporation (IPC), and its affiliates. The first is a non-binding heads of agreement (HoA) with Marine Low Carbon Power Company (MLCP), a joint venture (JV) between IPC’s New World Energy (IPCNWE) and Richmond Offshore Energy, to sell an interest in a sub-area of a North Sea license. The second entails IPC’s purchase of ordinary shares of HALO Offshore UK (HALO), which was recently acquired by Orcadian.

Under the first deal, MLCP is set to get a stake in the Earlham discovery and Orwell field redevelopment by acquiring a 50% interest in a sub-area of license P2680, comprising blocks 50/26 and 49/30b, with Orcadian retaining a 50% carried interest. 

The oil and gas player won both discoveries in the third batch of the UK’s 33rd licensing round. Formal agreements with the North Sea Transition Authority (NSTA) were inked in August following the provisional awards in May. 

MLCP plans to deploy its mobile offshore generating unit (MOGU) in one of the discoveries, which will in turn deliver what it says will be carbon-free energy to customers and IPCNWE’s battery projects.

As stated by Orcadian, its new partner has designed a 300 MW offshore power facility with integrated carbon dioxide (CO2) capture in partnership with GE Vernova and Capsol Technologies of Norway. The captured CO2 is planned to be stored offshore in a reservoir, most likely within the license P2680 sub-area. 

Steve Brown, Orcadian CEO, said: “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.

“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.”

The Earlham and Orwell developments are expected to provide the gas supply and the carbon storage reservoirs for the MOGU development, subject to NSTA approval. MLCP is also exploring opportunities to share offshore cable and grid connections with nearby wind farms.

According to a recent analysis by Westwood Global Energy on the co-location of oil and gas projects, offshore wind farm developments, and carbon capture and storage (CCS), the Norfolk Boreas wind farm overlaps the Orcadian-operated blocks that include the Earlham discovery.

Earlham is estimated to hold 114 billion cubic feet (bcf) of methane resources and Orcadian believes Orwell could deliver a further 31 bcf. The former was discovered in 1995 by Talisman and in 1996, BP drilled a high-angle appraisal well with a 1,559-meter section in the gas pay zone. Tests were stopped and the well was abandoned because of the high CO2 content in the gas. 

A MOGU-based pre-combustion CO2 removal system is planned to be used to reduce the CO2 content in Earlham gas to a level that is acceptable for combustion within LM-6000 gas turbines. The captured pre-combustion CO2 will then be combined with the post-combustion captured CO2 using Capsol Technologies’ system and the combination reinjected into either Earlham, Orwell, or a nearby licensed CO2 reservoir.

“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. This project is one which we believe supports the government’s vision of a clean UK power system in 2030 whilst crucially also delivering on the government’s energy security goals,” noted Brown.

The transaction, which the partners expect to complete in Q1 2025, is valued at $2.2 million, with $1.4 million payable on completion and two tranches of $400,000 payable on achieving fuel gas quality production rates of over 50 MMscf/day. It is subject to approval by the NSTA.

Furthermore, IPC agreed to take over the loan advanced by Shell to Orcadian Energy in August 2019 by converting $1.4 million out of $1.5 million owed into funding as part of the consideration for MLCP to acquire a stake in Earlham and Orwell. The balance of $100,000 will be exchanged for an Orcadian loan note, dated June 30, 2026, and convertible into approximately 312,500 ordinary shares in the company.

As for the second deal, Orcadian agreed to sell 50% of the ordinary shares of HALO, a company it acquired earlier this month, to IPC. The partners say they intend to seek production acquisition opportunities for HALO with a preference for low-emissions, non-operated, gas-producing licenses.