Engie's UK Cygnus a Year Overdue

France’s Engie, which reported earnings last week, has told NGE that its UK southern North Sea Cygnus gas field development will not produce until 4Q 2016. The field had originally been due to start production in 2015; installation work began in 2014.

“The Cygnus partners confirm that Cygnus first gas is now targeted for the fourth quarter of 2016. Further delays were encountered in hook-up and commissioning activities,” Engie said in a statement emailed to NGE on August 3.

The £1.4bn ($1.56bn) project, sanctioned in 2012, is expected to contribute about 2bn m³/yr, or 5% to UK gas production, at its peak. Gas will be piped through a new 50-km pipe into the existing Esmond transportation system to Bacton in eastern England. Licensees in the 18bn m³ field are Engie E&P (38.75%, operator), the UK’s Centrica (48.75%) and Germany-based Bayerngas Norge (12.5%).

Installation work at the Cygnus field last year (Photo credit: Engie)

Engie also told NGE that first gas from its Touat field in the Algerian Sahara remains on schedule for 2017. That's consistent with what its Spanish contractor Tecnidas Reunidas said in its 1H results last week. However, a recent Oxford Institute for Energy Studies report by Algeria expert Ali Aissaoui estimated the 4.6bn m³/yr field, initially planned to start up in 2016, would not now launch until 2018. Engie E&P's stake in Touat is 65%, with state producer Sonatrach 35%.

Upstream, LNG earnings hit – agreement with North Sea explorer

Engie reported 1H 2016 group profit up 11% year-on-year at €1.2bn. But pre-tax upstream earnings (Ebitda) fell by 16% to €618mn, despite a 3% rise in production to 165,750 boe/d. Global gas and LNG made a €39mn loss this year (from earnings of €233mn in 1H 2015) hit by the continuing shutdown at Yemen LNG since April 2015, one of its main contractual suppliers. Engie’s LNG cargo sales increased to 56 (or 3.9bn m³) in January-June 2016 (from 52 in 1H 2015).

Separately, Engie has signed a memo of understanding with small UK-listed explorer Hague and London Oil (Halo) to help the latter boost gas production and reserves, the latter announced August 4. Engie expertise in energy management will “offer an innovatively structured gas off-take, designed to help Halo secure the funding of such assets whilst minimising the dilution to Halo's shareholders.” While not an exclusive arrangement, both have agreed that Halo will provide Engie with a first look at all projects it pursues and that fit the description of assets sought within this MoU.

The MoU covers European assets only. However, Halo announced June 24 it had acquired five interests (from 50% to 100%) in five exploration blocks offshore Western Sahara from Premier Oil, in return for 5% of future royalties and divestment proceeds. Norway’s oil fund in June 2016 divested its stakes in Kosmos and Cairn because of their interests in the contested Western Sahara territory. The territory's annexation by Morocco in 1979 is not internationally recognised, but explorers are interested because of world-class gas discoveries offshore Mauritania to the south.

Engie's upstream division, Engie E&P, is 30% owned by Chinese sovereign wealth fund China Investment Corporation (CIC). Production is focused on Europe (Norway, UK, Netherlands, Germany) but it also has interests, mainly exploration, in North Africa, Azerbaijan (20% in the Absheron field), Qatar (60% operator of block 4, with PetroChina 40%), and the Asia-Pacific (primarily a 33.33% stake in the Eni-operated Jangrik gasfield due to start up next year).

Mark Smedley