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Financial Times: Shell and ExxonMobil scale down North Sea presence

By Ed Crooks
Published: June 15 2007 03:00 | Last updated: June 15 2007 03:00

North Sea oil fields producing about 54,000 barrels a day have been put up for sale by Royal Dutch Shell and ExxonMobil, in the latest move by the big oil companies to scale down their presence in the region.

Shell has also scrapped plans for a new building on its campus outside Aberdeen.

The North Sea is one of the world’s fastest-declining areas for oil production. The latest BP Statistical Review of World Energy shows UK output fell by 9.6 per cent last year – faster than any other country except Turkmenistan and Chad.

It also has high costs compared with other areas and has been hit by the chancellor with two tax increases in recent years.

Tom Botts, Shell’s vice-president for exploration and production in Europe, said: “These are relatively high-cost assets within our European portfolio, where other operators might be better placed to add value.”

The fields date from the 1970s and 1980s, the oldest having come on stream in 1978. Shell’s share of their output accounts for less than a 10th of its total North Sea production, which is about 350,000 barrels of oil equivalent a day.

It is likely that the fields will be bought by smaller companies, which have been entering the North Sea to take on assets that have become too small to be worthwhile for the large companies. The oil majors need to invest money and management time in higher growth regions where they can develop fields that will have a significant impact on their earnings.

Smaller companies have often been able to increase production at mature fields by increasing investment.

Mike Tholen, of Oil & Gas UK, the industry association, welcomed the news. He said: “The transfer of assets will undoubtedly attract new investment and enhance ultimate recovery of oil and gas from those fields, which is in the interests of all stakeholders in the North Sea.”

Shell and Exxon said they were already in talks to sell four of the fields, which produce about 8,000 b/d, to Fairfield Energy, a privately held company backed by investors including Warburg Pincus.

Mark McAllister, Fairfield’s chief executive, said: “The restructuring of the North Sea has been dominated by the North American independents such as Talisman and Apache and it is a terrible shame there aren’t more UK independents involved. Venture and Tullow are substantial UK independents but apart from those there aren’t many there.”

Shell insisted it was still committed to the North Sea, and highlighted its £350minvestment in the Fife and StFergus gas plants as evidence.

Copyright The Financial Times Limited 2007

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