$1.1bn oil deal
Cambo poised to go ahead after owner acquired
Controversial Cambo oil field off Shetland looks set to go ahead after its majority owner was acquired by an Israel-based conglomerate.
Delek Group said its North Sea subsidiary Ithaca Energy has acquired private equity-backed Siccar Point Energy for an initial $1.1 billion.
The deal could rise to $1.5bn and is part of a plan for Ithaca’s initial public offering later this year. It will help seal its position as a major North Sea producer, boosting its output by 8,000 to 9,500 barrels of oil equivalent per day (boed) to a range of about 75,000 to 85,000 boed.
Cambo, which was 70% owned by Siccar Point, has been the focus of protests by climate change campaigners and politicians opposed to further fossil fuel exploration in the North Sea.
But Ithaca’s chief executive Alan Bruce said Cambo and Rosebank were “two of the largest undeveloped and most strategically important discoveries” in UK waters.
He added that developing they represented a “huge opportunity to not only help secure the UK’s energy future for at least another quarter of a century, but also to create thousands of direct and indirect jobs in the process.
“This is a transformational deal for the company which cements Ithaca’s position as a leading independent exploration and production operator in the North Sea.
“The acquisition doubles our recoverable resources and means that we now have interests in a significant portion of the largest U.K. continental shelf fields.”
A spokeswoman for Shell, which still owns a 30% stake in Cambo, said it had nothing to add to its statement in December when the oil giant said it had “concluded the economic case for investment in this project is not strong enough at this time, as well as having the potential for delays.”
It had been reported that Shell was reconsidering its decision in light of changing priorities on oil and gas in light of Russia’s invasion of Ukraine.
The Cambo oil field is thought to contain 800 million barrels of oil, but its development has not yet received final approval from UK government regulators.
Scotland’s First Minister Nicola Sturgeon has said the project should not go ahead because it does not fit with the climate change agenda.
A spokesman added: “We have consistently called on the UK government to urgently re-assess all approved oil licences where drilling has not yet commenced against our climate commitments.
“New oil and gas fields do not present a timely solution to improving our energy security in the coming years. Even once operational, the extracted fossil fuels will still be affected by the same global market forces which have contributed to the current energy price crisis.”
The UK government’s new Energy Security Strategy includes a commitment to a new licensing round for oil and gas projects in the North Sea to reduce the country’s dependency on overseas supplies.
Private equity funds Blackstone and Blue Water Energy formed Siccar Point in 2014 with an initial investment of $500 million.
It is one of several private North Sea firms created in recent years to acquire assets from oil majors such as Shell and BP that sought to downsize their operations in the basin. In January 2017 it acquired OMV’s portfolio for $870 million.
The company holds stakes in large fields Mariner and Schiehallion, as well as undeveloped reserves including Cambo and Rosebank.
Ithaca is making an upfront payment of $1.1 billion for Siccar followed by a series of contingent payments to a maximum of $360 million.
It said that $300 million will be linked to future developments and that $60 million will be linked to short-term realised commodity prices.
The Siccar Point team will transfer to Ithaca on closing at the end of the year and that these will further enhance its established operating capability.