BP Said to Approach Possible Buyers for North Sea Assets
July 20 2017 - 7:02AM
Dow Jones News
By Sarah McFarlane, Matt Jarzemsky and Ben Dummett
LONDON-- BP PLC has approached potential buyers of its
oil-and-gas production assets in the North Sea, people familiar
with the matter said, around 50 years after the once-state-owned
company helped pioneer deepwater extraction there.
Some of the people said the talks included essentially the full
range of BP's currently producing assets in the North Sea, where
the London-based company is the top producer. The potential buyers
include private-equity firms, the people said.
The discussions are at an early stage, the people said, and it
isn't clear what the value of the assets is or which ones BP would
ultimately part with.
"At the minute, there's been initial conversations," one of the
people said.
BP said it remained "committed to the U.K. North Sea, and any
rumors to the contrary are simply false." The company said it was
in the middle of a plan to double its U.K. North Sea production to
200,000 barrels a day and pointed to important new developments
there west of the Shetland Islands.
"Our aim is to sustain a material business in the region for
decades to come," BP said.
North Sea production peaked in the 1990s and it has become more
expensive to extract the remaining barrels from aging fields.
Production began declining after 2000, although recently perked up,
after a series of government tax breaks encouraged investment.
Any move to sell a large portion of its North Sea assets would
be a departure for BP. The company has been a leader in the North
Sea since the mid-1960s, when exploration and production began,
helping make the region one of the world's great petroleum
basins.
Like other big oil companies, BP has been reviewing its assets
after a three-year rout in oil prices, with high-cost regions
including the North Sea particularly in focus. It already sold part
of its interest in the North Sea's Magnus field to EnQuest PLC
earlier this year.
Royal Dutch Shell PLC, previously the region's top producer,
halved its North Sea output after striking a $3.8 billion deal with
private-equity backed Chrysaor in January.
"The majors have reduced spend because they can't get the
returns in the North Sea compared to more attractive, lower-cost
opportunities globally, " such as Brazilian deep water and U.S.
shale, said Fiona Legate, an analyst at Wood Mackenzie, the
Scottish energy consultancy.
Wood Mackenzie forecasts U.K. production will rise to 1.87
million barrels a day in 2017, from 1.67 million a day last year,
as a result of new developments starting up and increased
production efficiencies.
"Without material discoveries going forward we'd expect
production to go back into terminal decline around 2018 in the
U.K.," said Ms. Legate.
Private-equity firms are coming in and extending production on
fields and "that happening more often will add up and help squeeze
those extra barrels out from the North Sea," added Ms. Legate.
Sarah Kent contributed to this article.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com, Matt
Jarzemsky at matthew.jarzemsky@wsj.com and Ben Dummett at
ben.dummett@wsj.com
(END) Dow Jones Newswires
July 20, 2017 07:47 ET (11:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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