Abu Dhabi National Energy has acquired a range of assets in the North Sea from Shell and ExxonMobil in a move that highlights the growing presence of smaller independents in the region and the determination of the behemoths to cut and run.
Abu Dhabi National Energy has acquired a range of assets in the North Sea from Shell and ExxonMobil in a move that highlights the growing presence of smaller independents in the region and the determination of the behemoths to cut and run.
The United Arab Emirates-based company, also known as Taqa, acquired what Shell - together with its silent partner ExxonMobil - once called its Northern Business Unit, comprising all equity, infrastructure and production licences for the Tern, Eider, Cormorant North, South Cormorant, Kestrel and Pelican fields and related sub-sea satellite fields, At the same time, Taqa, which is majority owned by the Abu Dhabi government, said it had appointed the energy services company Wood Group to operate, maintain and manage offshore production in the northern North Sea fields, and that Taqa itself would continue to focus instead on building its presence in the UK.
While overall production from the North Sea's UK Continental shelf has been falling since 1999, the area still produces 2.2% of global oil and gas supplies and supports around 350,000 jobs.
No financial details were revealed for the acquisition of the fields, which produce around 40,000 barrels of oil equivalent per day.
An insider at Shell, who asked not to be named, said: "This kind of deal is extremely good for Shell, which has been offloading its mature North Sea assets for some time - although this is a fairly big chunk of what it still has there.
"Don't forget that it's not just assets that Shell is offloading there, but also all the associated personnel, which will likely transfer to the new owner under a TUPE (Transfer of Undertakings - Protection of Employment) agreement, so it reduces expenditure in several ways.
"Shell's big cash cow in the North Sea is the Brent field, but pretty much all of the rest of operations there are something of a burden.
"Given Shell's massive overheads, the cost of extracting oil in the North Sea is expensive. But for smaller independents, like Taqa and many of the American and Canadian companies operating in the region with much lower overheads, it doesn't take much to make a small profit, especially with the price of oil over $140 a barrel."
Indeed, the oil majors have been selling their assets in the mature, declining oil sector for years as they look to invest in cheaper production regions with higher potential returns.
However, Taqa has already amassed more than $1bn of North Sea oil and gas assets in purchases over the last two years from Canada's Talisman and BP.
The Shell insider added: "As far as Taqa is concerned, a lot of these smaller state-owned Middle East oil companies are extremely cash-rich, and want to expand globally. Basically, there are only so many skyscrapers you can build."
The UAE is the world's fifth-largest oil exporter and Taqa's expansion is part of the Gulf Arab state's drive to use record oil revenues to diversify. The company expects to announce four new deals worth around $5bn this year, including a joint venture with a major US utility and a windfarm in Morocco.
Peter Barker-Homek, Taqa's chief executive, said in a statement: "Today's announcement brings us one step closer to our stated strategy of building a global energy company, with an equal distribution of assets in North America, Europe and the Middle East.
"We believe that the North Sea offers significant potential for companies like Taqa and we will be making a significant investment over the coming years to extend the productive life and commercial viability of our assets."
The transaction is subject to regulatory approval and is expected to close in the fourth quarter of 2008.
