SHELL is selling assets that produce around half of its North Sea oil output to the independent producer Chrysaor, in a US$3.8bn deal heralded as a generational shift for the mature basin.
The purchase makes Chrysaor the largest independent North Sea exploration and production company. It has agreed to acquire assets that produce 115,000 bbl/d of output, leaving Shell with 96,000 bbl/d. Chrysaor says it has no plans to cut the 400-strong workforce gained in the deal and promised significant reinvestment in the assets it is buying, which consist of Shell’s interests in Buzzard, Beryl, Bressay, Elgin-Franklin, J Block, the Greater Armada cluster, Everest, Lomond and Erskine, plus a 10% stake in Schiehallion.
The North Sea – with its mature fields and relatively high operational costs – has had a bleak outlook following the oil price collapse in 2014 that has seen tens of thousands of jobs lost. The resulting cost-cutting has, however, put the sector in a position to succeed says Chrysaor, noting that the North Sea basin having been developed over the last 40 years is now halfway through its productive life. This is typically the point where a new generation of operators steps in to maximise a basin’s total potential, bringing fresh new capital, new strategic priorities and new techniques, the company said.
“The North Sea has undergone a revolution in recent times with operating costs falling to competitive economic levels, and we believe this signals a moment for a generational change in the basin,” said Chrysaor chair Linda Cook. “Chrysaor… will form a platform for significant growth in the region.”
The company plans to extend the production life of the fields through enhanced recovery techniques and exploration in and around its acquired acreage, and will seek further acquisitions in the area.
“We intend to create a UK champion, with the skills and resources of a major independent oil and gas company, to help ensure that the basin’s future potential is realised safely, profitably and in alignment with the government’s policy of driving investment and maximising economic recovery,” said Chrysaor CEO Phil Kirk. The deal is expected to close in the second half of this year.
The decommissioning costs of the assets sold have been put at US$3.9bn and Shell has agreed to contribute US$1bn to the eventual costs.
For Shell, the deal marks its continued efforts to sell US$30bn worth of assets to help pay for its £47bn (US$59.4bn) purchase of BG Group. Earlier this week, Shell also announced a deal to sell its interest in a Thai gas field to Kuwait Foreign Petroleum Exploration for US$900m.
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