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Smaller North Sea firms seek UK help to extract $500b oil

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Saturday, July 06, 2013

LONDON Britain must get tough with major oil firms that prevent smaller producers from getting access to platforms and pipelines, or risk leaving as much as $500 billion worth of oil in the ground, North Sea oil companies say.

Output from the North Sea has been in steep decline as mature fields are exhausted and global firms such as BP and Shell focus on more promising projects elsewhere. But there is still oil under the sea bed that a host of smaller operators is keen to extract, and Britain’s cash-strapped government is anxious to maximise tax revenues.

The problem is, many small producers lack the infrastructure to get their oil to market and need access to platform hubs and pipelines owned and operated by the big oil companies. And much of that infrastructure is coming to the end of its working life.

Helping small rivals, however, is at best a low priority for oil majors, and at worst unprofitable and not in their interest.

“It’s more of a headache than anything else,” said Stephane Foucaud, managing director at research and analysis firm First Energy Capital. “They (oil majors) want to exit the North Sea, so dealing with small offtake agreements is not a priority.” The industry’s infrastructure code of practice is meant to help smaller players bring new fields onstream that require access to third party platforms and pipelines. That often doesn’t happen, according to industry insiders.

“We look for owners of infrastructure to market it … and use it for the greater good, but there is a variation in that,” said Simon Toole, head of licensing exploration and development at Britain’s Department of Energy & Climate Change. Time is running out. By the middle of the next decade, over half of existing North Sea infrastructure will be decommissioned or no longer available for use. Consultants Hannon Westwood estimate some 4.88 billion barrels of oil equivalent (boe) in recoverable reserves, worth some $500 billion, are at risk of being stranded as a result.

“Decommissioning has been pushed back but it does need to start happening,” said Philip Whittaker, an associate director at the Boston Consulting Group.

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