BP has sold 25% of its North Sea Magnus oilfield and handed control over the Sullom Voe terminal to oil and gas production company EnQuest for $85 million (£68m).
Magnus is one of the largest oilfields in the North Sea and is 160 kilometres north-east of the Shetland Islands.
The deal includes a 25% stake in a number of pipelines and a 3% stake in the Sullom Voe Terminal which will now be operated by EnQuest, a company which was spun out of Petrofac.
EnQuest has an option to purchase the remaining 75% interest in Magnus, a further 9% interest in the Sullom Voe Terminal and the remainder of BP’s interests in the associated pipelines for a cost of $300 million (£240m).
BP group chief executive Bob Dudley (pictured) said: “EnQuest’s experience of investing in and extending the life of mature assets in the North Sea make them a natural operator of Magnus and Sullom Voe in this later phase of their life.
“We believe this will enable them to prolong the life of the assets, benefiting the region and creating additional value for both EnQuest and BP shareholders.”
If EnQuest were to purchase the remainder of the assets, BP would retain 50% of net cash flows from these assets, up to a limit of $1 billion.
BP currently owns 12% of the Sullom Voe Terminal.
Mark Thomas, BP North Sea regional president, said: “Sullom Voe and Magnus have been great businesses for BP, but to maximise the economic life of these important assets, we believe this deal will offer them a better long-term future.”
Bernard Looney, BP chief executive, Upstream said: “As BP continues to focus its North Sea portfolio around assets where we can add new capacity through disciplined investment in major projects, it is essential to partner with experienced operators like EnQuest to extend the life of existing mature assets like Magnus and Sullom Voe for the benefit of both companies and the region as a whole.”
The deal, which is subject to partner, regulatory and other third party approvals, is expected to be completed later this year.
EnQuest chief executive Amjad Bseisu said: “This transaction capitalises on EnQuest’s strengths in realising value from the management of maturing oil fields, as underlined by BP’s confidence in proposing a change of operatorship to EnQuest.
“Magnus is a good quality reservoir; it has large volumes in place, with potential for infill drilling and for the revitalisation of wells, and scope for field life extension. It is a producing asset that would materially increase EnQuest’s reserve base.
“We are a natural strategic partner to BP for maturing assets and this innovative structure represents a natural evolution of EnQuest’s business.”
Unite the union has pledged to make sure the rights of BP workers are protected in any transfer to a new employer.
Around 100 BP staff are currently associated with Magnus and associated infrastructure, and approximately 240 with the Sullom Voe Terminal.
Unite regional officer John Boland said: “Many people will look on this news as the end of an era, given BP’s long association with the Sullom Voe Terminal and the Magnus field. It was discovered by BP way back in 1974 when the company was still owned by the public.
“BP has said it will now start consultations and Unite is pledged to making sure the rights of our members are protected in any transfer. We are clear – there should be no change to the terms and conditions of any worker moving over to employment by EnQuest.
“When transfers like this happen, there is often a concern about potential job losses. We strongly hope that is not the case here, and we will be talking with BP and EnQuest to get a clear idea of their plans for the future so our members are fully informed.”
Oil & Gas UK Chief Executive Deirdre Michie said: “This is an innovative deal which will open a new chapter in the life of Sullom Voe and the productive life of Magnus, an iconic North Sea oil field. It also sends a very positive signal on the opportunities available in the North Sea and is an indication of confidence that, even after producing oil for more than thirty years, this mature field still has more to give.
“The transfer of assets and infrastructure builds on a long-term trend to see ‘the right mature assets’ move into the right hands of established UK mature field operators and sees a fresh commitment to exciting development opportunities by established incumbent companies.”