BP has agreed to sell a package of its interests in the Bruce assets in the North Sea to Serica Energy. BP currently operates the assets, which comprise the Bruce, Keith and Rhum fields, three bridge-linked platforms and associated subsea infrastructure.
Under the terms of the agreement, Serica will pay BP an upfront payment of £12.8 million, a share of cash flows over the next four years, a consideration equivalent to 30% of BP’s post-tax decommissioning costs and several contingent payments dependent on future asset performance and product prices. Overall, BP expects to receive payments of around £300 million, the majority of which will be received over the next four years.
Bernard Looney, BP chief executive, Upstream, said: 'This is an example of BP’s Upstream strategy in action – refreshing our portfolio and focusing our activity on assets which will add most value over the long-term.
'We remain committed to the North Sea and continue to invest. We expect our production there to double to around 200,000 barrels equivalent a day by 2020 through new projects like Quad 204 and Clair Ridge.
'While the Bruce assets are no longer core to BP, we are confident that Serica is the right owner and operator to maximise their continuing value for both companies and for the UK.'
Serica chairman Tony Craven Walker commented: 'This transaction will establish Serica as a leading British independent oil company with the scale, balance sheet and operating capability to prosper in the North Sea’s rapidly changing upstream oil and gas industry.'
The Bruce field was discovered in 1974 and came into production in 1993, with Keith tied back to Bruce in 2000. Rhum, a high-pressure, high-temperature satellite field located 40 kilometres to the north of Bruce, was brought into production in 2005.
The Bruce assets are expected to transition to Serica as a fully operational entity with around 110 staff who operate and support the assets expected to transfer with the business. Their contractual terms and conditions are protected under UK Transfer of Undertakings (Protection of Employment) Regulations (TUPE). BP will now begin consultation with in-scope staff.
Subject to the receipt of regulatory and other third-party approvals, BP aims to complete the sale and transfer of operatorship in the 3rd quarter of 2018.
The deal comprises:
Bruce – all, except 1%, of BP’s 37% interest (partners Total 43.25%, BHP Billiton 16%, Marubeni 3.75%)
Keith – all of BP’s 34.84% interest (partners BHP Billiton 31.83%, Total 25%, Marubeni 8.33%)
Rhum – all of BP’s 50% interest (partner Iranian Oil Company (UK) Limited 50%)
As the structure of the agreement is based on staged payments to BP that depend on the operational and financial performance of the assets in future years, BP will retain a small ownership (1% of Bruce) to oversee its interests.
BP will retain financial liability for decommissioning of the assets but planning and execution of decommissioning activity will be undertaken by Serica.
In May, BP brought the major Quad 204 redevelopment west of Shetland into production, the third of seven global major projects starting production for BP in 2017. Clair Ridge, the second phase of the giant Clair field, is expected to begin production next year.
BP is also investing significantly in the reliability and integrity of its existing North Sea assets through an extensive renewal programme. In 2016, BP completed a $1 billion investment in the ETAP cluster of fields which is expected to extend field life until at least 2035.
BP is also in the middle of a six-well exploration programme in the UK in addition to drilling approximately 50 development wells over the next 3-4 years.
BP was awarded seven licences, incorporating 25 blocks or part blocks, as part of the 29th licence round award announcement earlier this year. These licences include firm commitment for three additional exploration wells.