UK's IOG begins drilling key North Sea gas well ahead of first gas in Q4

UK-listed IOG has started drilling the development well at the Blythe field in the North Sea as it continues to target first gas in the fourth quarter of 2021, the company said Aug. 3.

The first phase of IOG's gas development will see gas produced from the Blythe, Southwark, and Elgood fields, as it looks to develop a major gas hub in the southern North Sea.

Blythe is expected to take less than three months to complete and IOG has said it will be able to give comprehensive guidance on initial production rates once the well is finished.

IOG CEO Andrew Hockey said the well was "another important step for IOG in delivering our Phase 1 project."

On July 29, IOG said it had agreed to sell gas from its North Sea hub to a trading subsidiary of Russia's Gazprom -- London-based Gazprom Marketing & Trading, or GM&T.

The agreement relates to IOG's equity production for the first two years from the Elgood and Southwark fields, part of the company's Phase 1 development project, and the Nailsworth and Elland fields that form part of its Phase

2 development.

Gas will be sold on a day-ahead daily nomination basis at a price linked to the UK NBP, it said.

IOG has said UK gas prices for the coming winter are almost double its planning base case.

S&P Global Platts assessed the Winter 21 NBP price at 106.25 p/th ($14.77/MMBtu) on Aug. 2.

By comparison, the Winter 21 NBP contract was assessed at just 39.75 p/th a year ago.

European gas prices have surged in 2021 because of a cold winter, low storage stocks, competition from Asia for LNG and Russian supply constraints via Ukraine.