Dow Jones Newswires: 2nd UPDATE: Shell, Esso To Sell Selected UK North Sea Assets

June 14, 2007: 08:13 AM EST

(This updates an item that ran at 1057 GMT, adding details on asset sale to Fairfield.)

LONDON -(Dow Jones)- Royal Dutch Shell PLC (RDSB.LN) and Exxon Mobil Corp. ( XOM) unit Esso Thursday have put up for sale selected assets in the U.K. North Sea and entered exclusive negotiations to offload their Dunlin fields interests to U.K. oil company Fairfield Energy Ltd.

The sale process comes as the North Sea oil-producing region is hit by depleting reserves, high costs and aging facilities.

Last month, ExxonMobil confirmed it was offering equity in other North Sea assets, jointly owned with Shell.

The Anglo-Dutch company said, however, that it “remains committed to Europe and the North Sea as a core business area.”

Shell said the sale would impact 25,000 to 30,000 barrels of oil equivalent a day out of total U.K. output of 350,000 barrels of oil equivalent a day.

The companies are marketing Northern North Sea assets, including operated interests in Cormorant Alpha, Cormorant North, Tern, Eider, Kestrel and Pelican.

In a separate statement, Fairfield Energy said it had entered exclusive negotiations to acquire interests held by Shell and ExxonMobil in the Dunlin cluster. The deal is subject to completion of a final sales agreement.

Shell has also initiated the marketing of its interest in the Strathspey field, a non-operated oil and gas development.

Tom Botts, executive vice president for Shell exploration and production in Europe, said: “Active management of our assets is not new, and is a key part of Shell’s portfolio-based strategy.”

“These are relatively high cost assets within our European portfolio, where other operators might be better placed to add value,” he added.

The announcement comes after Shell and ExxonMobil have sought to offer a 25% stake in their U.K. mid-North Sea High blocks in exchange for funding part of the cost of drilling, information confirmed by the U.S. major last month.

According to documents posted on a Schlumberger Ltd. (SLB) Web site, the two companies are also looking to sell their joint 100% interest in the Clipper South tight gas field and Shell is proposing to sell its minority stakes in several North Sea discoveries. Shell has previously declined to comment and couldn’t comment Thursday.

The U.K. North Sea sector has suffered from rising costs, including a 10 percentage points tax hike enforced last year; depleting output; and, an aging infrastructure, which have triggered safety breaches at Shell.

Among the most recent issues, it received a notice for improvement from the U.K. Health and Safety Executive due to “a failure to inform the HSE on a gas release on the Dunlin Alpha platform March 30,” a Shell spokesman confirmed. The platform is part of the assets that are being put up for sale.

“That failure to inform the HSE was due to a human error and procedures are being reinforced to ensure that a similar breakdown in communications does not occur in the future,” the spokesman said. The notice has now been complied with, according to the HSE’s Web site.

For Shell, the issue of gas releases is particularly sensitive after two workers were killed at the North Sea Brent Bravo platform as a result of a gas release, leading to a GBP900,000 fine in 2005.

-By Benoit Faucon, Dow Jones Newswires; +44-20-7842-9266; benoit.faucon@ dowjones.com

  (END) Dow Jones Newswires
  06-14-07 0813ET
  Copyright (c) 2007 Dow Jones & Company, Inc.

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