The Ayoluengo field, located in the La Lora concession area, has a long history of oil production, dating back to the 1960s. A total of 54 wells were drilled within the field boundary north of Burgos, targeting reserves in Purbeck aged sandstone formations at between 900 and 1,400 metres below surface. Peak production of 5,900 bopd was achieved in 1969.
The La Lora licence, which includes the Ayoluengo Field, was granted in January 1967 for a period of 50 years.
When LGO’s Spanish subsidiary, CPS, took over full operations of the field at the end of 2007, no modern geological assessment had been conducted to identify enhancement opportunities. Having undertaken this assessment CPS identified a variety of proven conventional recovery methods and scheduled an exploitation plan to prioritise developments to enhance production levels, though activity levels were curtailed owing to the uncertainty related to the concession expiry date.
As the Company continued to operate the concession without operational or environmental issues, providing local employment in an area where there is high unemployment and with considerable potential still remaining in the field, the Company prepared an application for an extension to the licence period and this was submitted for consideration by the Spanish Authorities in August 2015.
On the 27th January 2017 the Spanish Cabinet of Ministers informed the Company that its Licence extension application for the renewal of the La Lora Concession had been rejected. Contrary to advice obtained by the Company in Spain which suggested that there was a strong case for a renewal, the ultimate decision was taken on a purely legal, rather than commercial or technical basis and this was complicated by relevant petroleum laws changing several times between the granting of the initial licence and its expiry. As a consequence, the Concession terminated at midnight on 31 January 2017.
The Spanish Ministry of Industry, Energy and Tourism ("Ministry") has indicated that it will offer the Ayoluengo Field to CPS for a new 30-year concession as soon as possible. In the meantime, operations at the Ayoluengo Field have been suspended and employment contracts for the vast majority of CPS's staff members have also been suspended.
Given the uncertainty in the renewal of the licence, as announced on the 13th
January 2017, a temporary shutdown of operations began in mid-January 2017 to ensure the Company was not in breach of operating without a valid Licence. Up to the time of this shutdown, there were 12 wells producing at the Ayoluengo Field. Gas generated from the site was either used directly for the oil heater and pump motors, or converted to electricity and used to run every aspect of the field (from the pumping systems to the office computers). All wells were produced using conventional downhole pumps and beam engines (nodding donkeys) that were powered by gas produced in the field. The production facility enabled the oil to be treated (by removal of water) and safely stored before being transported to industrial consumers in Northern Spain. Water produced on site was re-injected. Operating in this way ensured that CPS could maximise oil production, whilst fully safeguarding the environment.