CHEMICALS giant Ineos has said it plans to become a significant player in the West of Shetland oil and gas business after agreeing to acquire exploration interests in the area.
The company, which runs the sprawling Grangemouth refinery complex, has agreed to buy stakes in two licences from Siccar Point Energy for an undisclosed sum
Owned by billionaire Jim Ratcliffe, Ineos reckons the area containing the licences offers one of the most exciting prospects in British offshore waters.
The licences contain the Lyon prospect. Ineos thinks this could be on a scale to match the giant Laggan Tormore development West of Shetland, which Total brought into production last year following a multi-billion dollar investment programme.
Ineos acquired a stake in Laggan Tormore and West of Shetland exploration acreage in May when it bought the North Sea oil and gas portfolio of Denmark’s Dong Energy for up to $1.3 billion (£1bn).
The deal with private-equity backed Siccar Point is the fifth Ineos has struck in the North Sea since 2015, when it started developing an oil and gas business.
The company could use gas from the North Sea to provide feed stock for its chemicals business.
It has invested heavily in adapting Grangemouth to handle shale gas imported from the USA.
The latest deal will boost hopes there could be a surge in activity West of Shetland. This could help the industry fight back from the downturn triggered by the sharp fall in the crude price since 2014.
Majors such as BP and Royal Dutch Shell have invested heavily in developing big new fields in the area, such as Quad 204 and Clair Ridge. They expect to achieve high profit margins using modern production technology.
There has been relatively limited exploration West of Shetland.
BP yesterday announced it had agreed to sell its interest in the mature Bruce field east of Shetland to Serica Energy for an initial £12.8 million.
Wood Mackenzie analyst Fiona Legate said the deal squared with the consultancy’s view BP will look to sell all bar its core West of Shetland fields, which still have materiality and longevity.
The chief executive of BP’s exploration and production business, Bernard Looney, said it would focus activity on assets which will add most value over the long-term.
He noted: “We remain committed to the North Sea and continue to invest. We expect our production there to double to around 200,000 barrels equivalent a day by 2020 through new projects like Quad 204 and Clair Ridge.”
London-based Serica said the acquisition will be transformational for the firm, positioning it as one of the leading mid-tier independents in the North Sea.
It expects to be able to generate good returns from investing in North Sea assets that may be too small to interest majors.
Serica’s executive chairman, Tony Craven Walker, said its directors have been pleased with the performance of the interest in the Erskine field acquired from BP in 2014 in a £10m deal.
Ineos said Lyon could be large enough to form a new gas-hub development similar to Laggan-Tormore. It has interests in other discoveries that could be linked to the hub.
Siccar Point chief executive Jonathan Rodger said: “We are excited to be moving forward in conjunction with INEOS to drill the Lyon prospect. This represents an opportunity to unlock the material gas potential of the most northerly licenced area of the United Kingdom Continental Shelf.”
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