By Stewart Dalby
InfraStrata is an Aim-listed small cap oil explorer and gas storage company focused on the UK, where it operates four licences and has interests in several others. This year is an exciting one for the company because it has two wells planned, one on its Northern Ireland salt cavern gas storage project and another on its onshore Northern Ireland exploration licence which could be basin-making.
We have written before that its potential fast-acting salt cavern gas storage project in Northern Ireland has seemed like a bit of a Cinderella in the portfolio after the group diversified into more exciting exploration projects following the mothballing of a seasonal gas storage scheme in Dorset, Southern England.
The Islandmagee gas storage project in County Antrim, Northern Ireland, appeared to be left on the shelf following the pull-out of partner, BP Gas Marketing, last year to concentrate on other projects. To date InfraStrata together with partners have spent over £5 million advancing Islandmagee.
The project also looked stalled because funding (£4 million) was lacking to drill an important well to extract a salt core and further advance the project’s design. But the scheme started to move again in late 2014 when it was given a boost by the news of a €2.5 million (£1.9 million) matching grant from the EU towards the drilling of the Islandmagee-1 well, which is required to provide further data to understand the rock mechanics and composition of the salt to complete engineering design ahead of FID in 2016.
Since then InfraStrata has got a placing and subscription of 52,500,000 new ordinary shares away to raise £2.1 million which together with £400,000 received from a data release agreement provides funding to pay the other half of the well cost and meet management costs till the end of 2015. The well is planned for May.
This is a major strategic project. It will consist of seven salt caverns which, if and when built in five years’ time, will give it capacity of 16 billion cubic feet (500 million cubic metres) of gas. This is enough for one month’s supply for the whole island of Ireland and 60 days for Northern Ireland.
InfraStrata has been at pains to communicate with local community and environment groups as well as local newspapers and other media in all its projects. Comment has been made that Ireland is dependent on gas for around 60 per cent of electricity supply with 90 per cent of the island’s gas imported via a single pipeline from Scotland.
Security of supply is very much on people’s minds in Northern Ireland. The issue has been heightened by the recent news that Centrica, which controls Britain’s biggest storage site, Rough, has said a technical problem identified by a routine inspection could reduce supply capacity at the site by 30 per cent, potentially tightening supplies and fuelling sharp price gains. In these circumstances, sites like Islandmagee become ever more important. Salt cavern gas storage provides much-needed flexibility when compared to other storage methods. The facility will be able to switch from injection to withdrawal quickly to cater for short term spikes in demand such as a cold spell or a period of low wind generation which increases the load on gas fired generation.
The prospects for Islandmagee are good and it is a major project not only because it has a capex of £274 million. However, InfraStrata will not be in for the long haul. The company’s CFO Stewart McGarrity told Oilbarrel recently: “The company’s intention is to realise value for shareholders from the company’s interest in this project as soon as practicable”.
With the collapse of the oil price, exploration is perhaps not as beguiling as it was perceived to be, but InfraStrata has an exciting exploration well on the cards, also in Northern Ireland. On shore the company holds a 663 sq. km block in the central Larne-Lough Neagh Basin, which, said CEO Andrew Hindle has been “completely overlooked” by the industry, with just six wells drilled despite its potential to be an onshore extension of the prolific East Irish Sea Basin. There has been just one well on InfraStrata’s licence, drilled by Shell back in the 1971 without any seismic.
Indeed, lack of seismic has been a key reason for the basin’s neglect. A layer of basalt at the surface makes imaging difficult but InfraStrata has applied new technology to this problem, allowing it to create a model of the subsurface and identify previously unseen prospects.
One of these, the Woodburn-1 well which will be InfraStrata’s maiden exploration hole will be tested this year. It will be a £4 million well that will drill to 2,000 metres to target Triassic and Permian sandstones as well as additional potential in the Carboniferous. The well carries a P50 prospective resource of 40 million barrels (11 million barrels net to InfraStrata).
All the necessary regulatory approvals have now been granted to allow the company to drill the well at Woodburn, near Carrickfergus.
The ‘Consent to Drill’ approval from the Department of Enterprise Trade and Investment, follows a separate consent issued by the Northern Ireland Environment Agency (Water Management Unit (NIEA) which regulates the well in terms of surface water and groundwater impacts.
These approvals embody the previously stated commitment by InfraStrata that the exploration is conventional and will not now, or at any time in the future, involve any hydraulic fracturing (also known as ‘fracking’).
The shares were trading at 2.88p last evening, well below the placing price of 4p. But then the trading climate for small cap oil and gas shares remain poor at the moment.
Again InfraStrata has been scrupulous in conferring with local press and interest groups. One oil and gas centred publication said: “ If oil and gas is encountered and successfully developed in County Antrim – following the relevant approvals – it would have a positive impact on the local and regional economy, with job creation and other economic benefits. Northern Ireland has a long tradition of engineering industry and indeed, the Harland Wolff shipyard has focused on the offshore energy sector in recent years”.
In Dorset, the company is operator in a 584 sq. km block near the giant Wytch Farm oilfield. This is an area that sees sporadic flurries of interest from industry, and rightly so. It seems the Basin could ultimately produce over 700 million barrels, of which 100 million could be in its licence.
There are two targets here: the offshore Colter prospect, which could host 50 million barrels in the Triassic and where a 1989 well drilled on the margins found a 10 metre oil column in the Sherwood Sandstone. “We believe there’s a significant structure updip of that,” said Hindle.