Equinor buys 40% stake in Rosebank

8 October 2018
04 October 2018, Week 39, Issue 469

The Norwegian company’s cost-cutting expertise should expedite development of the US$6 billion project, reports Helen Castell from London

WHAT: Equinor has opted to buy back into Rosebank after previously owning a stake. 

WHY: The company has become an expert in efficiency after driving down costs at its Johan Sverdrup project.

WHAT NEXT: Rosebank is estimated to cost US$6 billion to develop. 

Norway’s Equinor has been confirmed as the buyer of Chevron’s 40% stake in the Rosebank project in the West of Shetland (WoS) part of the UK North Sea. 

Rosebank is one of the biggest undeveloped oil and gas fields on the UK Continental Shelf (UKCS), with Chevron estimating it could contain over 300 million boe. Siccar Point Energy, which is backed by private equity firms Blue Water Energy and Blackstone, is a 20% shareholder in Rosebank, with Suncor Energy owning the remaining 20%.

“Today’s agreement allows us to buy back into an asset in which we previously had a participating interest, demonstrating our strategy of creating value through oil price cycles,” said Al Cook, UK country manager for Equinor, which will also take on operatorship of Rosebank. 

The Norwegian company’s UK portfolio also includes operatorship of the Mariner, Bressay and Utgard fields plus stakes in the Jupier and Alba fields. It holds interests in more than 20 exploration licences, most of them as operator, and also has three producing offshore wind farms. Apart from Mariner, however, these represent fairly modest investments and Equinor has long been in need of another major project to cement its footprint in the region.

Equinor’s participation will inject some momentum into the development of Rosebank, which has been plagued by high costs, partly because of its location in more than 1,000 metres (3,280 feet) of water. This has forced Chevron to take a cautious on-off approach since the field was discovered in 2004. The complex project could cost US$6 billion and require a FPSO plus up to 20 production wells to develop.

Equinor has an excellent track record in efficiency, though, best demonstrated by its Johan Sverdrup project offshore Norway. In late August the company said the total cost of developing the asset had been revised down to 127 billion kroner (US$15.2 billion), which is around 6 billion kroner (US$720 million) less than was projected as recently as February.

A re-scoped and expedited development plan for Rosebank will mean plenty of new contracts being offered to oilfield service companies, who will be watching progress closely. 

The Rosebank sale could also trigger further disposals by Chevron in the North Sea. The US major had already revealed plans to sell all but its Clair Field and Rosebank assets in UK waters and it continues to seek buyers. The fact that it is now offloading even Rosebank makes an additional sale of Clair, in which it has a 19.42% stake, look more likely.

Lying 47 miles (75 kilometres) west of the Shetlands in water depths of around 460 feet (140 metres), it is anticipated that the Clair field will yield over 60 million barrels by 2050, according to Chevron. Its second phase of development – the US$9 billion Clair Ridge project – is designed to have a capacity of 120,000 bpd of crude and 2.8 mcm per day of gas.

With oil and gas prices strengthening, the field should be an attractive proposition for other companies in the region. While the field’s current operator BP would be the obvious candidate to buy Chevron’s share – not least following its purchase last July of ConocoPhillips’ 16.5% stake in the field – Equinor too could be interested, for the right price.

Lundin Petroleum announced on October 3 that it would acquire Equinor’s 15% stake in the Lundin-operated PL359 licence in the Norwegian North Sea. Pending approval, Equinor will receive a cash sum – size undisclosed – for its stake in the licence, which contains the Luno II discovery, plus Lundin’s 20% interest in PL825, which contains the Rungne exploration prospect. 

Although this fresh commitment to Rungne will come with costs, the deal should leave Equinor with cash on hand should it wish to deepen its presence in UK waters.

Equinor’s transaction with Chevron is also a boon for the North Sea, reinforcing the basin’s renaissance as an attractive investment destination. The Norwegian firm will now look to transfer the expertise it has built up at Johan Sverdrup to the UK side of the North Sea and ramp up activity at Rosebank. 

Edited by

Ryan Stevenson

Managing Editor

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