Harbour Energy is making progress with addressing hundreds of electrical faults that have delayed the start-up of the Tolmount gas development in the southern North Sea, which is facing a reserves downgrade after a well fell short of expectations.

During a presentation at the company's first capital markets day last week, Phil Kirk, who heads Harbour’s European business, said that work to fix the electrical issues is now about “97% complete, nearly finished”.

Harbour is now expecting Tolmount to come on stream sometime in the first quarter of next year, possibly by the end of January if the remaining inspection and repair work goes to plan and is not interrupted by poor weather.

The new delay is in addition to the one that Harbour announced in June, when it said start-up would not take place in July as hoped but instead would be pushed back to around the end of 2021.

It also follows earlier delays caused by the Covid-19 pandemic.

“Tolmount has been the source of some frustration but I can report good progress with getting to the bottom of the previously reported ATEX electrical issues and fixing them,” Kirk said.

ATEX is a European-wide safety certification standard for electrical equipment operating in potentially explosive areas, such as gas platforms.

About 2250 items have been inspected and about 100 items are still to be checked, with more than 1200 faults discovered and nearly 700 repairs undertaken, Kirk noted.

About 150 repairs still need to be carried out before full system commissioning can take place, he added.

On the subsurface side, four development wells have been drilled and are available for production.

However, the third of these encountered a shallower gas-water contact than expected.

As a result, Harbour said it expects to downgrade reserves to between 20 million and 30 million barrels of oil equivalent net to its 50% interest.

That is 25% to 50% lower than expected when the project was sanctioned by Premier Oil in 2018.

Meanwhile, production rates that were expected to plateau at between 20,000 and 25,000 barrels of oil equivalent net to Harbour are now set to be about at the lower end of that range at about 20,000 boepd.

Tie-back boost

More positively, Kirk noted that the final investment decision reached in July on the Tolmount East development, a planned single well tie-back to the new Tolmount infrastructure, should lead to first gas in 2023, giving the overall development “robust economics”.

The Tolmount platform’s topsides and jacket were fabricated by Rosetti Marino at its yard in Ravenna, Italy and installed last year by Heerema Marine Contractors' semi-submersible crane vessel Sleipnir.

Harbour became the operator of Tolmount after it was created via the reverse takeover of former operator Premier Oil by private equity-backed Chrysaor. Premier acquired its 50% operated interest in the offshore field, located in Block 42/28d, in 2016 as part of its acquisition of E.On E&P UK.

Dana Petroleum, Harbour’s partner on Block 42/28d, funded the Tolmount Main platform and pipeline — called the Humber Gathering System — together with a subsidiary of midstream infrastructure operator Kellas Midstream.

Investec analyst Nathan Piper said that although the reserves reduction at Tolmount “is disappointing, we expect it will accelerate development of Tolmount East and other nearby discoveries”.

“Despite the short-term issues at Tolmount, once on stream it increases Harbour’s exposure to record UK gas prices,” he added.

In a note to clients, Stifel analyst Chris Wheaton said: “The company has flagged a likely reserves downgrade at Tolmount following disappointing development drilling results — if we were to assume a 30% downgrade at Tolmount, this would be only [about] 3% of group reserves.”

Harbour has said production next year is expected to be 195,000 to 210,000 boepd and where it finally ends up within that range will be determined in part by exactly when Tolmount comes on stream in the first quarter.