INEOS swoops in for Conoco North Sea

As widely reported over the weekend, INEOS is the front-runner for the ConocoPhillips’ UK North Sea portfolio. ConocoPhillips had a buyer for the portfolio back in 2015, but pulled the deal citing that it had no desire to sell-out at the bottom of oil price cycle,

INEOS has beaten other likely UK North Sea focussed contenders which could include Ithaca Energy, Premier Oil, Neptune Energy, Chrysaor and SiccarPoint. The sale, estimated to be around USD3 billion, will exclude the Teeside Norsea terminal and London trading business.

INEOS existing North Sea portfolio
Source: The Times

The below was originally published on 24^th June 2018:

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ConocoPhillips' is one of the largest operators in the UK North Sea, being the operator of the Britannia area, the J-Area and large swathes of the Southern North Sea. ConocoPhillips is also a non-operated partner in the giant Clair field.

Clair is one of the largest oil fields in the UK offshore and located in the West of Shetlands which is making a name for being the last frontier of the UK and is increasingly attracting further exploration activity. The Clair field was brought onstream in 2005 and is currently undergoing a second phase of development (Clair Ridge). Clair Ridge is planned to come onstream in Q4 2018 with operator BP targeting an additional 640mmbbl which will extend the life of the Clair Area beyond 2050. As soon as Clair Ridge is onstream, the partners will be planning for the Phase 3 of the development known as Clair South.

On the operated assets, Britannia is one of the largest gas fields in the UK which has acted as a hub for various tie-backs over the years. The J-Area, although now beginning to mature, has been a highly successful gas hub in the Central North Sea where more infill drilling and exploration activity is planned into 2019 and 2020.

The Southen North Sea assets are the most mature with some going into decommissioning. ConocoPhillips has widely announced the closure of the Theddlethorpe gas processing plant which is the terminus for its CMS pipeline. This will lead to early/forced decommissioning of all the fields which currently utilise the CMS pipeline as the export route including the Faroe and Tullow Schooner and Ketch fields which will cease production in August 2018.

The ConocoPhillips' UK portfolio is concentrated around a few hubs and excluding the Southern North Sea, has a good amount of life remaining with current production at c.80mboe/d.

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Forties Pipeline System reopens in time for the New Year

On 11^th December, INEOS the owner of the Forties Pipeline System, had discovered a hairline crack in the pipeline at Red Moss near Netherley. The crack continued to grow upon monitoring and the entire system was subsequently shutdown. INEOS announced this morning that the repairs are "mechanically" complete with the system being restarted - export rates should resume to previous levels around the new year.

The system carries c.450mbbl/d of production from the North Sea to the Kinneil processing facility in Scotland. The 235 mile pipeline links more than 80 North Sea fields and delivers almost 40% of UK North Sea production. Upon its outage, Brent crude jumped to USD65/bbl signalling the importance of North Sea production to the global oil markets.

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Siccar Point portfolio tidy-up

Siccar Point has an attractive long-term portfolio currently weighted developments. The portfolio includes a number of earlier stage opportunities. In November, the company took the opportunity to prune the portfolio - bringing in a partner on Lyon and selling Jackdaw to a more natural pair of hands.

On 21st November, Siccar Point announced that it had farmed out UK licences P1854 and P1935 to Ineos. The blocks are located in the West of Shetlands and contain the Lyon prospect which is estimated to contain 1-3tcf of recoverable gas. Ineos now has interests in all four fields that make up the Lyon gas cluster: Lyon, Tobermory, Bunnehaven and Cragganmore - this has the potential to be a future gas hub in the area. For Ineos, the transaction builds upon the recent acquisition of the DONG portfolio as it seeks to become a major UK oil & gas player. Post the farm-out, Siccar Point will hold 33.3% in the blocks with Ineos holding 66.6%.

At the beginning of the month, Siccar Point also announced the divestment of its 26% stake in three blocks covering the Jackdaw discovery to Dyas. Jackdaw is operated by Shell (74%) and is a HPHT field. The discovery lies in the J-Block area and is subject to sanction. The project was put on hold by BG in 2014, but continues to hold substantial gas resources that is expected to be monetised in the early 2020s.

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INEOS acquires DONG E&P portfolio

On 24^th May, INEOS announced the acquisition of DONG's E&P business for USD1.05bn with two further contingent payments:

• USD150 million relating to the Frederica stabilisation plant; and
• USD100 million subject to the development of Rosebank

As part of the transaction, DONG will retain all hedges that are currently in place (worth USD285 million) and cashflows from the oil & gas business (worth c.USD310 million). Ineos will adopt all decommissioning liabilities (c.USD1.1 billion).

The deal includes a portfolio of long life assets with 100mboepd production and 570mmboe of commercial reserves and contingent resources. The portfolio's corner stone assets are Ormen Lange (Norwegian gas) and Laggan-Tormore (new gas field in West of Shetlands).

All 440 DONG personnel will transfer to INEOS on completion, which is expected towards the end of 2017. The deal with propel INEOS into the top 10 league of North Sea players and enable the company to significantly expand its trading and shipping activities.

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