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The Herald: Shell sells controlling interest in Dunlin cluster to Fairfield

IAN McCONNELL, Business Editor
December 22 2007

Shell and ExxonMobil last night announced they had sold their controlling interests in the Dunlin cluster in the North Sea, 195 kilometres north-east of Lerwick in Shetland, to UK oil and gas independent Fairfield Energy and Mitsubishi Corporation of Japan.

Fairfield Energy announced back in June that it had entered into exclusive negotiations with Shell UK and US giant ExxonMobil’s Esso Exploration and Production UK subsidiary to acquire this pair’s combined 56.8% interest in the Dunlin and Dunlin Southwest fields, joint 97.6% stake in the Merlin field, and total 100% interest in the Osprey field. Osprey and Merlin are linked to Dunlin by sub-sea tie-backs.

In the deal announced last night, Fairfield will acquire 70% of the combined Shell and ExxonMobil equity interest in the Dunlin cluster assets and the operatorship of these. Mitsubishi, which started activity in the UK North Sea in 2006 with a gas development project in the southern basin, will take 30% of the Shell and ExxonMobil stakes in the Dunlin cluster. Mitsubishi was not mentioned in Fairfield’s statement about the exclusive talks back in June.

Shell refused to reveal the price obtained for the Dunlin interests but acknowledged the cluster was a “significant asset” in terms of its scale in a North Sea context.

In spite of this sizeable divestment, however, a spokeswoman for Shell last night emphasised its continuing commitment to the maturing province.

Asked about the rationale for the deal, she replied: “It is part of portfolio management. That is an integral part of our business worldwide and in the North Sea. Although Dunlin is a significant asset, we believe that Fairfield and Mitsubishi are better placed to manage the next stage of its field life.”

She added: “Let me stress we remain committed to the UKCS (UK Continental Shelf) as a core business area.”

Shell put current total production of the Dunlin cluster, which is in water depth of about 151 metres, at about 8000 barrels of oil equivalent per day.

The oil giant noted that it had as a company produced about 360,000 barrels of oil equivalent per day in the UK in 2006 and added that the disposal announcement last night would “impact some 3000 boe/d from that portfolio” – representing its share of Dunlin production.

The sale agreement remains subject to several conditions, including government consent.

Shell said it anticipated transfer of operatorship to Fairfield early in 2008. This indicates a slight slippage of the timescale from that when talks were announced in June.

Fairfield had said at that stage that it expected to become the operator of the Dunlin cluster this year.

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