UK: Breagh Costs Rise. Production Faces Delays

Breagh field operator,RWE Dea UK, has infomed Sterling Resources Ltd.  of a probable cost and schedule overrun on its Breagh development project. The probable cost and schedule overrun relates to modification works being carried out at the existing Teesside Gas Processing Plant (“TGPP”) so that the Breagh production can be received and processed at TGPP.

Sterling previously announced that such modifications at TGPP were anticipated to be completed during the second quarter of 2012 and that first gas from Breagh was anticipated in the third quarter 2012. While the extent of delays at TGPP are not presently known, such modifications at TGPP are now not expected to be completed during second quarter 2012 and first gas from Breagh may be delayed into the fourth quarter 2012. It is hoped that further information will be available in early June.

Significant efforts are ongoing to evaluate the extent of the delay to start-up and the cost overruns associated therewith and identify and implement measures to mitigate any such delay and cost overrun. If such mitigation cannot be achieved, overall development expenditure (100 percent) for the first phase of Breagh development could be in the range of £590 to £595 million, 4 to 5 percent over the estimate provided in the Company’s 2011 Annual Report, subject to downward revision should remediation measures be successfully implemented.

Drilling operations will continue unaffected by any onshore delays, and it is expected that four wells will be on-stream by the end of the year, Sterling says.

Breagh is the biggest field development project under the operatorship of RWE Dea in the United Kingdom. RWE Dea holds 70% interest in the Breagh gas field as operator. The Breagh field is one of the largest natural gas discoveries under development in the UK Southern North Sea.

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Offshore Energy Today Staff, May 21, 2012