NORWEGIAN oil and gas giant Equinor has shown huge confidence in the potential of the West of Shetland area by striking a deal to buy in to Rosebank, which it described as one of the biggest undeveloped finds on the UK Continental Shelf.
Rosebank lies about 80 miles north west of Shetland and is estimated to contain around 300 million barrels oil.
Read more: Oil industry interest in West of Shetland intensifies
Equinor has agreed to buy the 40 per cent interest in Rosebank held by America’s Chevron, which is shifting investment from the North Sea to America’s shale fields.
The price of the deal was not disclosed.
But Equinor, formerly known as Statoil, has signalled it is considering a massive investment in the field.
“We have a proven track record of high value field developments across the North Sea and will now be able to deploy this experience on a new project in the UK,” said Al cook, vice president of global strategy and business development and UK country manager at Equinor.
The company is developing the 320 million barrel Mariner heavy oil field East of Shetland, which is due onstream this year.
Read more: North Sea development to support 1500 jobs
Experts at Wood Mackenzie oil and gas consultancy reckon it could cost more than $6 billion to install all the facilities required to produce oil from Rosebank.
Rosebank is located in water depths of more than 1,000 metres, in an area of high winds and waves.
The deal reflects growing industry interest in the relatively under-explored West of Shetland. Classed as a frontier area, West of Shetland contains come big finds that have been left undeveloped for years, reflecting the challenges involved in bringing them onstream.
Rosebank was discovered in 2004.
Chevron shelved plans to develop the field in 2013 months before the oil price plunged, triggering a three year downturn that resulted in firms slashing investment in the North Sea.
Read more: Chevron casts doubt on £6bn oil scheme
Chevron said that the project was not then economically attractive but has been considering a revised scheme.
Advances in technology combined with tax reforms and the sharp fall in the cost of services amid the downturn have encouraged firms to take a closer look at West of Shetland.
BP is developing the giant Clair Ridge field with Chevron in the area. The firms expect to be able to produce oil from it relatively cheaply.
The crude price rally since late 2016 has helped improve the economics of projects in UK waters.
The chief executive of the Oil & Gas UK industry body, Deidre Michie, said the Rosebank announcement was significant and would further boost investor confidence in the potential of the basin.
She added: “As industry continues to emerge from one of the most testing downturns in its history, its challenge is to hold firm in its approach and build upon the investment conditions which have helped improve ... competitiveness.”
Read more: North Sea oil and gas industry to generate £10bn surplus this year
Kevin Swann, senior research analyst, Europe upstream, at Edinburgh-based Wood Mackenzie , said: “We believe this deal is good for the project, the other partners in the project, and the UK upstream sector. Equinor can come in and move this project forward.” He reckons Equinor sees an opportunity to re-scope the project and reduce the costs.
Statoil sold a 30% stake in Rosebank to Austria’s OMV in 2013. Private equity-backed Siccar Point Energy bought OMV’s UK business in 2016.
Hedda Felin, Equinor’s senior vice president for UK & Ireland offshore, said Mariner is one of the one of the largest investments on the UKCS in over a decade.
In July Chevron put its assets in the Central North Sea off Scotland up for sale.
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