3i boosts CH4 Energy to the tune of £30m

VENTURE capital firm 3i is to provide CH4 Energy, a new entrant to the gas industry, with £30m over the next few years to allow the company to acquire and develop UK gas fields.

The "significant funding" from 3i will allow the initial search for offshore licences in the North Sea and future acquisitions.

Graeme Sword, head of 3i’s oil and gas team in Aberdeen, said: "There is so much change in the North Sea as majors redeploy their capital. Rising costs, increased taxation and pressure to release fallow acreage have led to asset sales. We want to be ready to build on this."

CH4 will focus on gas production and the exploitation of marginal or dormant gas discoveries. Sword said the firm will be looking to acquire assets from the major industry players.

He added: "There are big opportunities as the market begins to pick up. Cash is available for acquisitions and mergers so there will be a more buoyant mood."

CH4 will be led by three founding directors, all former senior managers at oil giant Amerada Hess. The chief executive is Mark Routh, finance director Phil Kirk and the company is chaired by Francis Gugen, a former CEO of Amerada Hess in Northwest Europe. Plans are in place to expand the team as it acquires assets and increases its portfolio.

Routh said: "The major oil companies are increasingly focusing upon large fields with exceptional rates of return. Prospects, discoveries and mature fields with low reserves are simply not on their radar screens since they do not meet their materiality criteria. CH4 is targeting these assets."

The company plans to use the latest technology to maximise satellite and infill production opportunities. Discussions with a number of prospective parties is already taking place.

3i’s Oil and Gas director Mark Dickinson said: "Venture Production and Highland Energy have demonstrated 3i’s unique approach and track record in funding production businesses at start-up and on successive funding rounds. There is a thriving market for businesses specialising in the recovery and development of marginal or mature oil and gas fields, and CH4 is well placed to capitalise on this opportunity."

Consort, Dana, Venture Production and Tuscan remain independent producers who concentrate on finding smaller oil and gas discoveries where the multinationals find it difficult to make money.

Edinburgh Oil & Gas watched its shares rise last week on the back of speculation that oil and gas giant BG Group will make a bid for its 5% stake in the Buzzard oil discovery. The site, 100km from Aberdeen, is to yield over 400 million barrels of oil.