BP is expanding its stake in the UK’s Clair field by buying a 16.5% interest in the asset from ConocoPhillips.
In exchange, BP will offload its entire 39.2% stake in the Greater Kuparuk Area on the North Slope of Alaska as well as its holding in Kuparuk Transportation to the US super-major, it announced on July 3.
The purchase of the stake in Clair – which BP operates and the second phase of which, Clair Ridge, is due to enter production later this year – will see the company’s holding in the asset jump to 45.1% from 28.6%. Clair Ridge’s production capacity is estimated at 120,000 boepd, according to BP.
Although details of the North Sea and Alaska transactions have not been disclosed, BP said that taken together they should be cash neutral for both companies.
Describing the deal as a "massive vote of confidence in the North Sea" and fresh evidence of BP’s "enduring commitment to the region," Ariel Flores, BP’s North Sea regional president, said: "It signals our intent to look for opportunities around our core hubs in the West of Shetland [WoS] and the central North Sea."
"The deal underpins our current positive momentum with our newest asset, the Glen Lyon FPSO, recently completing its ramp-up to 130,000 bpd and first oil from our other WoS mega project, Clair Ridge, just months away," she said. "The North Sea is a growth region for BP as we seek to double our daily production by 2020 when compared with 2014 production rates."
BP and its partners are also expected to reach a final investment decision (FID) on the Clair South asset in 2021, with production due to start in 2025. The asset, which holds an estimated 300 million boe, could represent a gross capital cost of GBP2.3 billion (US$3 billion).
ConocoPhillips, which will retain a 7.5% stake in the Clair field, said that it remained committed to the UK and would still have a strong presence in the central North Sea through its operated J-Area and Britannia operations.
"The transaction allows us to focus our primary investments on strengthening these operated hubs, whilst reducing our exposure to large investments required by a non-operated asset," it said.
Despite the US company’s public proclamations of ongoing commitment to the North Sea, however, the reality is that it is probably looking for an exit. It emerged in May that the company was gearing up to sell some or all of its North Sea assets in a deal that could be worth up to US$2 billion.
Tight oil plays in the US, as well as its Alaska developments, are of more pressing concern to ConocoPhillips now, which would explain its move to gauge the market’s appetite for a sale of its North Sea assets.
ConocoPhillips had already signalled a weakening commitment to the UK. In April it announced plans to axe 450 jobs in the country over the next two years as it shuts down its Southern North Sea (SNS) production via the Theddlethorpe Gas Terminal. Job cuts will start in October.