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UK North Sea Industry Hammered By Oil Price Collapse

More than $4bn worth of North Sea fields have been put up for sale as the industry speeds up its retreat from Britain’s main oil province.

The German utility giant Eon is expected to launch the sale of its $2bn (£1.3bn) North Sea business after rubber-stamping the plan at a board meeting next month. Total of France has appointed Standard Chartered’s investment bank to sell a $1bn stake in its giant Laggan-Tormore gas project northwest of the Shetlands, while L1 Energy, the Russian investment vehicle chaired by the former BP chief Lord Browne, has begun sounding out suitors for $1.2bn worth of reservoirs.

L1’s move towards the exit comes just two months after it acquired the fields as part of its takeover of RWE’s oil arm. The firm, controlled by the oligarch Mikhail Fridman, has been forced to sell after the Department of Energy and Climate Change ordered it to find a new owner over worries that he could be targeted with the western sanctions that have hit other Russian companies.

The flurry of sales underlines a worrying trend for the region, where production has fallen to less than a third of its 1999 high and traditional producers are rushing for the exit. One executive warned of a glut of assets for sale because there was already a “silent backlog” of them.

Companies have slashed thousands of jobs as the collapse of the crude price since last summer has pushed projects into the red. The recent recovery from a low of $45 a barrel to $65 on Friday has softened the blow for some companies, but does not help with the industry’s underlying problems.

Half a century after the industry’s founding, the fields left in the North Sea are small, while costs remain among the highest in the world. Executives are girding for strikes by unions infuriated by proposals to increases hours and cut pay.

Tax cuts introduced this year by the chancellor George Osborne have failed to provide the promised boost.

Most troublesome is that the collapse in the oil price, which is still 40% below its peak last summer of $114 a barrel, has bought forward tens of billions of pounds in bills that will have to be paid to dismantle old platforms and pipes when they are retired.

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