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UK's Serica to seek new Iran sanctions waiver for Rhum ahead of Oct expiry

London — UK-based Serica Energy intends to seek the renewal of a waiver from US sanctions to allow for the continued operation of its Rhum gas field in the UK North Sea ahead of the expiry of the current license to operate at the end of October.

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Serica in November last year took over from BP as operator of Rhum -- which is co-owned by Iran's NIOC -- shortly after the US Office of Foreign Assets Control (OFAC) granted a license to operate the field outside of the US sanctions regime against Tehran.

Rhum and the linked Bruce field are important to UK gas output, producing at around 5 million-6 million cu m/d -- the equivalent of 1.8-2.2 Bcm/year -- representing as much as 6% of UK gas production and 3% of UK gas consumption.

"Since the full re-imposition of US sanctions against Iran, BP (until November 30) and Serica thereafter have been able to procure the goods, services and support necessary to maintain Rhum field operations, thereby preserving production from a strategic UK natural resource," Serica CEO Mitch Flegg said Wednesday.

"The existing license issued by OFAC expires on October 31, 2019. Serica will be applying for the renewal of the license during this year," Flegg said.

The company added that it intends to initiate the renewal process "well in advance" of the specified date.

A condition of the US license is that revenues generated from Rhum to the benefit of NIOC are held in escrow.

Rhum was closed completely due to international sanctions against Iran from late 2010 until November 2014 when it resumed production having won the first exemption allowing its restart before the sanctions against Tehran were lifted in January 2016.

Serica holds 50% of Rhum as well as a total of 98% in Bruce and a 100% stake in Keith.

Flegg also said that Serica was benefitting from an increase in the specification for CO2 content of gas delivered into the UK gas network at the St. Fergus Gas Terminal.

The rising of the CO2 threshold "eliminated the need for costly blending gas previously required to offset the relatively higher CO2 content of Rhum gas," Flegg said.

FUTURE OPPORTUNITIES

Serica -- whose current net production is some 30,000 b/d of oil equivalent -- said it would work to evolve its North Sea business, including the identification and acquisition of new assets.

"Serica is not just a late-life production operator -- we aim to expand the portfolio at all stages: exploration, appraisal, development and production," Flegg said.

He added that the search for new opportunities was currently focused on the UK Continental Shelf given its operating expertise is based around the Central and Northern North Sea.

"Serica's growth has been supported by our commitment to identify opportunities based on value rather than volume," Flegg said.

"We will continue to look for assets -- preferably operated rather than non-operated -- where Serica can add value when the current operator may be unable to do so," he said.

Serica is also set to look to improve the economics of the Bruce field. "The extensive infrastructure associated with the Bruce field offers significant capacity for third party tiebacks and Serica intends to fully investigate all opportunities to attract new business in this area," he said.