Business Model

The energy transition will play out over many decades. The requirement for low carbon, efficient oil and gas supply to the UK in the coming decade provides the opportunity for Angus to be an important energy supplier to the country and contributor to the energy transition through full depletion of onshore oil and gas fields in a sound environmental and commercial way.

Angus intends to invest in its onshore UK assets to maximise recovery and returns, using this production base as a platform to grow the business in the UK and abroad. The company is focused on developing and operating mature, conventional assets which deliver low risk growth opportunities and are a good fit with the company’s core competency in managing late-life assets.

Market Drivers

Gas remains a key source of energy in the UK

1. The Economist, 15th August 2024
2. CarbonBrief, 3rd Jan 2024
3. Office for National Statistics Census 2021, 5th January 2023

Core oil and gas production in the UK remains vital despite the impetus for new energy sources. The UK currently produces less than 50% of the gas consumed in the country and this share will decline significantly in the coming decade as fields deplete, especially if there are no incentives to invest to sustain existing production or develop new sources of production.

As a result, the country is in a prolonged transition where the need for gas will continue, while domestic supply decreases. As imports of gas increase to meet the demand gap, onshore gas can play an important role in safeguarding UK energy security. In addition, increasing LNG imports, with a carbon footprint of 79 kg/CO₂/boe, are nearly four times more environmentally damaging than domestic gas supplies, with a footprint of 21 kg/CO₂/boe (North Sea Transition Authority, 31st July 2023).

Unlike gas importers, domestic gas producers like Angus contribute significant revenue for the government, in the form of production and corporate taxes and local business rates. Angus is also an important employer of skilled operational and engineering staff and contractors in the north of England and Scotland.

Energy Transition

Angus is looking at leveraging its geological, drilling and engineering expertise in order to develop exciting new options at Saltfleetby for the energy transition, including:

• Natural Gas Strategic Storage
• Carbon Capture and Underground Storage
• Hydrogen Storage

Hydrogen Storage and Production

Hydrogen (H2) is the ultimate zero carbon transportable fuel. Significant expansion of wind power in the North Sea is producing substantial amounts of hydrogen which needs to be stored at scale once it has been converted into green hydrogen which reduces greenhouse gas emissions.

The UK is seeking to meet climate change targets and promote economic growth in tandem with green jobs. Creating adequate energy storage capacity will be crucial to ensuring energy security and affordability during the energy transition. Three key recent studies published by the UK government Department of Energy & Net Zero, the UK Storage Working Group and the International Journal of Hydrogen Energy point to the pivotal role to be played by hydrogen transport and storage infrastructure in making 2030 goals for low carbon hydrogen production attainable. Successful hydrogen storage will help mitigate volatility in global energy markets, optimise use of renewable energy using storage when demand is high, counterbalance seasonal fluctuations in energy demand and supply, and open up potential for hydrogen to be used in heat and power generation.

Demand for hydrogen, especially in the process industry, is set to emerge in the 2030s with demand of 20-50 TWhr, potential to generate power at 5-30 TWhr, heavy good road transport at 20-30 TWhr and home heating of up to 60 TWhr with H2 ready infrastructure ¹. The UK is unique within Europe for its high capacity H2 storage options in salt caverns, depleted gas fields and saline aquifers, making it well positioned to address predicted storage needs of 3.4 TWhr in 2030, rising to 9.8 TWhr in 2035 ².

Recent academic studies have identified the Saltfleetby gas field as the third most promising potential H2 storage site in the UK, with theoretical storage capabilities amounting to 0.77TWhr, a substantial part of the 3.4 TWhr potential storage required in the early 2030s and one of the few onshore options available ³.

Angus Energy Saltfleetby Hydrogen Production Concept

In December 2023, the UK Department for Energy Security and Net Zero published a policy supporting changing the blend of current mains gas to incorporate 20% hydrogen content as an interim step to support hydrogen production and use, while building supply.⁴The National Grid is also testing use of 2%, 5%, 20% and 100% hydrogen blended gas in the current national gas infrastructure with growing evidence of success.⁵

Alongside the option of hydrogen storage outlined above, Angus Energy has now explored the concept of producing green hydrogen using a modular 100MW plant developed by Electric Hydrogen using current and future wind farm power landed nearby, as illustrated below:

Our initial concept would be to sell up to 25mT of green hydrogen into the Humber Industrial Cluster to support its Net Zero plans. Other options include using the existing field and pipeline infrastructure to blend hydrogen into grid gas to represent up to 20% by volume or reinjecting excess hydrogen into the Saltfleetby field for future use.The flexibility of these options gives scope for the development of direct hydrogen demand while sustainably using and/or storing hydrogen for use in the current gas grid.

Our concept is aligned with the UK government’s Hydrogen Allocation Round (HAR) investment incentive, aiming to support facilities to pave the way for2.5GW of green hydrogen production by 2030.

At current strike prices for offshore wind and HAR1, our concept makes economic sense⁶, whilst at marginal power pricing, the cost for green hydrogen production becomes much lower as illustrated below:

We are considering a bid for the HAR 3 round in early 2025 and are testing investor interest to do so.

1. Hydrogen Transport & Storage Network Pathways, Department of Energy & Net Zero, 14th December 2023
2. Hydrogen Storage: Delivering on the UK’s Energy Needs, Hydrogen UK Storage Working Group December 2022
3. Multi-criteria site selection workflow for geological storage of hydrogen in depleted gas fields: A case for the UK, Saeed Harati, Sina Rezaei Gomari, Manu Ramegowda, Tannaz Pak, Internaitonal Journal of Hydrogen Energy, Volume 51, Part A January 2024 pp 143-157
4. Decision: Hydrogen blending in GB distribution networks: strategic decision, Department of Energy Security and Net Zero, December 14th 2023.
5. National Gas Future Grid investigations.
6. Electric Hydrogen techno-economic toolkit © Electric Hydrogen Co.

Future Strategy

Whilst the UK is becoming a more challenging market for further investment, Angus sees compelling opportunities in North Africa and North America in particular:

• UK onshore
  We believe there is a strong case for consolidation of existing onshore operators. This will reduce costs and ensure that, at the end of field life, an effective clean-up of the sites is performed to high environmental standards. There have been over 100 years of onshore oil and gas operations in the UK, focused in the East Midlands and southern England. 100s of wells have been drilled, many still producing and ultimately needing abandonment. This clean-up is a critical part of successfully transitioning away from fossil fuels and will require well-financed and competent operators to implement;
• North Africa
  North Africa has huge demand for oil and gas and offers both domestic and export opportunities, including pipeline gas sales to the European market. The region is rapidly expanding and Angus is actively looking at onshore production assets in parallel with renewable energy projects like solar.
• North America
  Higher oil prices and increasing LNG export capacity are driving high activity in the USA and Canada in the upstream sector. Both countries operate stable and low taxation policies which are attractive for investors. There is also a high level of deal flow in the region. Angus Energy is well placed to enter this region, with a focus on onshore, conventional production assets analogous to its fields onshore UK. The Company is well connected in both the USA and Canada and the management team has extensive experience of operating in both countries in the past.

Angus intends to pursue growth through mergers with existing companies and acquisitions that will be supported by Angus’s trading partners and shareholders. Angus will seek to be a force in consolidating smaller companies to remove costs and generate substantial savings in the production process, sparking new momentum and operating discipline.