XCITE Energy's plans to develop the Bentley heavy oil field east of Shetland have received a potentially lucrative vote of confidence from BP.
The Aberdeen-based oil and gas company said BP has agreed, subject to conditions, to provide $5 million (£3.2m) of financing for an early phase of the development. Xcite hopes to bring the field into commercial production next year.
In an example of how small firms can draw on the expertise of giants to improve the economics of big projects, BP will also provide specialist inputs that will boost the profitability of output from Bentley.
BP has agreed to supply Xcite with diluent, in the form of light crude oil, for blending with the output from the field. By using the diluent, Xcite will expect to narrow the discount it will have to accept for production from Bentley, which will be heavier than the standard mix.
Under an agreement reached in 2010, BP agreed to take the crude from Bentley and sell it in return for a fee per barrel.
During the initial phase of the agreement, Xcite will not have to pay for the diluent on delivery. BP will net the cost off against the proceeds from the sale of Bentley's output before paying them over.
Xcite said: "At current oil prices, this working capital support is estimated to be in the range of $20 million to $40 million depending on Bentley crude oil production and blending requirements, in respect of which Xcite Energy would pay BP an appropriate commercial financing charge."
Xcite's chief financial officer, Rupert Cole, said the agreement would provide valuable benefits and provided for a significant increase in BP's role in the Bentley project.
The supply of diluent was not included in the 2010 agreement, under which BP agreed to procure $20m financing from a commercial bank for Xcite, supported with a company guarantee, to help with the full field development of Bentley. That provision is superseded by the new agreement.
"We are very pleased with this further endorsement and increased support from BP, with the amendment to the marketing and off-take agreement providing significant additional financing," Mr Cole said.
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