Like other regions, BP’s North Sea business was affected by the fall in oil price over the past two years. But, as costs come down and new projects and exploration increases, the business is now on a path to sustainability and growth at lower prices.
Back in 2014, one barrel of oil cost over $30 to produce, while nowadays it is $16-17.
This dramatic reduction in costs is making the North Sea a more attractive place to invest. With plans to drive this down to around $12-barrel, and develop the remaining 2 billion barrels of known resources in BP’s North Sea portfolio, it’s clear that this mature region still has much to offer.
Mark Thomas, BP’s North Sea regional president, said: “We should take confidence from the extraordinary progress that we have made over the past couple of years. It is true testament to the talent and ‘can do’ attitude of the people working in our industry.
“I believe the North Sea is now on a path to be viable and sustainable at $50 prices.
“Our production in the North Sea will more than double by 2020 to around 200,000 barrels of oil per day.
“Major projects will be the driver behind this, like the new Glen Lyon floating production, storage and offloading vessel which will extend and expand recovery from the Schiehallion and Loyal oil fields located West of Shetland through to 2035.
“In addition, the second-phase development of the giant Clair field, Clair Ridge is expected onstream in 2018 with production expected to hit over 100,000 barrels of oil per day at its peak.“
Another new field, Culzean, is being developed with Maersk and is expected to produce enough gas to meet 5% of total UK demand at peak production.
Thomas added; “Last year, BP doubled its interest in Culzean from 16% to 32%.
“With projects like these, it is no wonder that chief executive Bob Dudley describes the North Sea as one of BP’s crown jewels.”
As well as major projects coming onstream, the pioneer spirit remains with exploring new opportunities. BP recently acquired new interests in the Jock Scott and Craster exploration prospects and, with partners, has started drilling a new carboniferous gas prospect in the southern North Sea. It sits several hundred metres beneath already mature reservoirs which are being produced.
Thomas added: “This is a deeply buried reservoir, and we’re looking forward to testing this concept to better understand its potential. If successful, it could open up a new phase of development in this region.”
The Oil and Gas Authority state that the North Sea’s development will rely on having “the right assets in the right hands.
BP was an early adopter of this philosophy, actively managing its portfolio as far back as 1996 when it sold its Beatrice, Buchan and Clyde fields to Talisman. In 2003, BP sold the iconic Forties field to Apache. Since then it has divested a number of assets to companies that are better positioned to bring more focus, and, in turn, attract more investment than BP could.
For example, BP announced it has agreed to sell part of its interests in the Magnus oil field and Sullom Voe terminal to EnQuest, a company that specialises in extending the life of mature assets in the North Sea.
Most recently, INEOS, who already own the Grangemouth oil refinery which receives North Sea oil, agreed to buy the Forties Pipeline from BP to further integrate these assets.Last year, BP joined forces with Det Norske to create Norway’s largest independent oil and gas business – Aker BP. As well as a $140 million cash payment for its Norwegian assets, BP became a 30% shareholder in the new company.
The deal created a renewed opportunity for growth for BP with new developments and exploration, while allowing Det Norske to benefit from the application of technology and increased efficiency. BP Chief Executive Bob Dudley said: “This innovative deal demonstrates how we can adapt our business model with strong and talented partners to remain competitive and grow where we see long-term benefit for our shareholders.”