Synergia Energy [LON:SYN], the AIM-listed, Australia-based, upstream gas production and carbon capture and storage (CCS) company released an important update on two of its flagship projects this week.
CCS is a cornerstone part of the UK government’s net zero climate goals. Ed Miliband, secretary of state for energy, doubled down on the government’s support for the new technology last week, defending the government’s plans to commit £22bn to the technology, with 75% of the money coming from the energy bills of UK consumers.
What is carbon capture and storage?
CCS technology is designed to reduce the amounts of carbon dioxide – a gas that contributes to climate change – emissions from industry and power generation and store it before it is released into the atmosphere.
The technology takes carbon dioxide from power plants, factories and refineries either pre- or post-combustion, compresses it into liquid CO2 and transports it via ships or pipelines to a site – often a depleted offshore oil well – and injects it into the geological fault, locking it away from being released in the atmosphere.
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CCS is a ‘need to do’
Miliband said in a BBC radio interview last week: “CCS is an innovative technology in terms of being used at scale, but all the expert advice – UK Climate Change Committee and others – say if we don’t do this we are never going to cut global emissions,” adding that he, and the Labour Party were committed to the government climate goals to achieve net zero – meaning no longer adding to the total amount of greenhouse gases in the atmosphere, by 2050.
Synergia is a CCS specialist – with its offshore Medway Hub Camelot CCS project based in the UK off the North Sea coast of East Anglia. Managers at the company were instigators of the last commercial gas storage facility to be built in the UK – the Humbly Grove gas storage facility in Hampshire. Synergia went into a 50:50 partnership with Wintershall Dea on the Medway project, which is located in the depleted Camelot gas field, and has the capacity to store 66 to 95 million tonnes of carbon dioxide.
The project will take carbon dioxide from the UK, France and the Zeebrugge, Rotterdam and Wilhelmshaven CO2 Hubs and will make its money from charging emitters transportation and storage fees.
Search for joint venture partners
However, the original partners, Wintershall Dea were acquired by Harbour Energy LON:HBR, last September, and on Monday (10th February) Harbour withdrew from the Medway Hub project. As such, Synergia is on the search for new JV partners. While it was continuing to conduct well integrity studies, it had paused all non-essential technical work until a replacement partner was secured.
The team at Synergia knew which way the wind was blowing and remain committed to the Medway CCS project, now owning 100% of the scheme. Harbour’s withdrawal, the company said, was seen as part of a rationalisation of its CCS portfolio, but the overall renovation of the UK’s North Sea oil fields under the North Sea Transitional Authority (NSTA) remains key to the next phase of the North Sea oil sector and the government’s ambitions to hit net zero.
Synergia’s CEO, Roland Wessel said: “The company believes the Medway Hub Camelot CCS project has significant technical and commercial merit and has the potential to make a material contribution towards the UK Government’s net zero targets, with a target storage rate of up to 6.5 million tonnes of CO2 annually. The company remains committed to progressing the project through to commercial operations and is pleased with the technical work undertaken to date on the project, which has reinforced its potential long-term value to shareholders.”
Synergia is also involved in the other end of the gas pipeline, developing the flagship onshore Cambay Gas Field in Gujarat, India, a licence that covers over 160 kilometres in one of India’s most-industrialised states. The developer acquired 100% of the project in 2021, buying GSPC’s 55% share of the licence, but then farmed-out 50% to Selan Exploration Technology Limited. Synergia has been exploring the geology since 2006 with a plan to frack the field for hydrocarbons.
Fully-funded $20m well to start in Q2
This week management said it was advancing a USD20m (£16.1m) field development programme, fully funded by its joint venture partner Selan. It would include a three-well drilling campaign, with two vertical wells followed by a multi-stage fracked horizontal well.
Drilling is scheduled to start in the second quarter of this year, subject to rig availability, with Selan prepared to redeploy an existing rig from Assam. and the company expects the new wells to drive a significant increase in production and cash flow.
Synergia said it was also progressing an extensive workover program at Cambay, using a combination of existing and newly contracted rigs. Several wells, including C-64, C-19z, C-74, and C-72, would undergo interventions to enhance oil and gas recovery, with sucker rod pumps being installed where necessary.
Additionally, the main producing well, Cambay C-77H, would have its production tubing replaced to improve gas flow rates. Initial workover activities at Cambay C-70 and C-63 were ongoing, with further remedial actions planned to optimise production.
Synergia Energy positioning itself at the forefront of the energy transition
Wessel said: “We benefit from the production of low-cost, high-value gas that is sold to domestic industrial customers and, following the proposed drilling of three new wells and workovers, there is the potential to significantly increase gross production and cash flow.”
He continued: “India remains an attractive jurisdiction to do business given high domestic gas prices and an attractive operating and fiscal regime and we look forward to reporting the results of our drilling and workover activities as they occur.”
Synergia Energy remains firmly-committed to both its UK-based CCS initiatives and its gas production operations in India. While the search for a new joint venture partner for the Medway Hub CCS project presents a temporary challenge, the company sees long-term potential in its carbon storage strategy. Meanwhile, the fully funded Cambay Gas Field development program is expected to drive a significant increase in production and cash flow. With strong government support for CCS and growing demand for gas in India, Synergia is positioning itself at the forefront of the energy transition, balancing traditional hydrocarbon development with emerging clean technologies.
The company’s shares opened the week at 0.0445p, down 73% over one-year. The company has a market cap of £5.95m.
