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Lloyds List: Oil majors start North Sea sales

Published: Jun 21, 2007

THE summer sales season is well underway for North Sea oil and gas assets. Oil majors Shell, ExxonMobil and Chevron all putting their infrastructure up for auction is a strong indicator that the sector is becoming unprofitable despite high oil prices for the big players, writes Martyn Wingrove.

London City rumours are flowing as to which companies will be making a play for the assets, but whoever takes them on will need to have strong financial backing for reinvestment and to pay for the decommissioning liabilities.

High oil prices and declining North Sea production have led to plenty of major platform deals over the decade, with the British sector seen as one of the most dynamic for sale and purchase.

Similar to shipping sales and purchase markets, when an owner cannot make enough money from the asset it gets sold to those who can continue flogging it or can invest to benefit from the upside potential. So far this year there had been a lull in the asset disposal market but, like buses, a few large platform sales have come along at once, rejuvenating the sector.

Shell and ExxonMobil decided to tell the market that their northern North Sea assets were up for sale, leaving just the almost unsaleable Brent platforms under their stewardship for tail-end production and decommissioning.

The quadrant 210 and 211 platforms Cormorant Alpha, Cormorant North, Tern and Eider are surplus to Shell and ExxonMobil’s requirements, as are the satellite fields Kestrel and Pelican. The two oil companies also have non-operated interests in Hudson, Otter and Strathspey fields up for sale, while they are in advanced negotiations with private UK firm Fairfield Energy covering the greater Dunlin area.

‘These are relatively high-cost assets within our European portfolio, where other operators might be better placed to add value,’ says Tom Botts, Shell’s head of exploration and production in Europe.

It has often been proved that smaller companies can get more out of the mature oil fields as they can bring new focus, greater investment and fresh ideas. New owners can often reduce costs, raise production and extend the life of fields and infrastructure.

Analysts in London suggested that British oil companies Dana Petroleum and Venture Production may take a punt at some of these assets as they have experience of making deals of a similar nature with Shell and ExxonMobil. The two London-listed firms took the Kittiwake platform off the two majors a few years ago and have turned its fortunes around by using it as a host for satellite field developments. They have also laid a new pipeline to export the oil instead of paying charter rates for a storage tanker.

Dana may have pre-emption rights anyway over the Hudson field as it is operator, so there could be interest in operating the host platform Tern as well to make sure its Melville satellite project ideas go swiftly forward.

Fairfield Energy’s management suggested that it may be interested in the other Shell assets once a deal on the Dunlin platform has been settled. It is backed by six private equity and investment banks so the cash is available for new acquisitions such as these.

Canadian firm Talisman could be in the frame as it has experience in buying assets from these companies. Last year it purchased the Auk and Fulmar platforms from Shell and ExxonMobil to combine them with the nearby Clyde platform as operating node.

The Calgary-based group, soon to be led by BP’s former downstream chief executive John Manzoni, has made the takeover and upgrade of mature assets a key strategy in the North Sea, but it may not want more assets so soon after taking over Auk and Fulmar.

On top of all this, Chevron has said it is selling its interests in the heavy oil Mariner and Bressay fields to focus on its West of Shetland projects, which include the big Rosebank oil discovery.

Chevron’s partner in the Mariner development project, Nautical Petroleum, believes a quick sell is on the cards as at least two large independent oil companies have been in to see the Department of Trade and Industry to gain its approval for a bid.

Nautical’s chief executive Steve Jenkins said the other partner, Eni, is definitely interested in the heavy oil project and hopes a deal can be completed soon to keep momentum going. He told Lloyd’s List that the companies showing interest in Mariner are also making enquiries about Nautical’s nearby exploration target Mermaid, which could be even bigger.

London analysts again have a thought on who has seen the DTI. They believe it could be large North American independents such as Apache, which bought BP’s Forties platforms a few years ago, or Calgary-based Nexen, which operates the Scott platform and the UK’s highest-producing field Buzzard. These companies may also look at Shell’s assets on sale.

Consultant Hannon Westwood believes these sales will be positive for the UK industry: ‘Their decision to sell is right for Shell and ExxonMobil and good for the UK offshore scene. It means companies that see more materiality in these properties will now be allowed to get on with new investment on these fields.

‘The transfer of ownership of mature production will act as a new catalyst for more exploration wells in these so-called mature field areas, and it would be surprising if new oil reserves were not found in the next five years as a result of this manoeuvre.’

Whoever eventually buys Shell and ExxonMobil’s stakes in the northern sector platforms, British contractor Amec is likely to gain the most as it already manages the facilities for Shell and is likely to be promoted to operator status by the new owners.

Hannon Westwood hopes more oil companies will follow Shell’s lead and put their mature assets up for sale: ‘The key to the North Sea’s next phase and a long production phase it might be is the transfer of ownership of most or many of its maturing assets to smaller companies and new entrants. The sooner the process steps up a pace, the better.’ and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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