AS the crude price traded at nine-month highs last month Scottish energy giant SSE poured a bucket of ice-cold water on hopes of recovery in the North Sea.

The 40 per cent rise in the crude price since early November, to around $53 per barrel, has been fuelled by hopes that effective coronavirus vaccines will be made available around the world by spring.

READ MORE: Scots oil firm to pay $250m to investors as crude price hits nine-month high

While the surge in infection rates caused by the new variant has concerned traders, moves by Saudi Arabia to ease fears that Opec + members would ease production curbs too quickly have helped calm nerves.

However, SSE has made clear that it now sees little appeal in the North Sea gas production business which it appeared to be a big fan of not so long ago.

The Perth-based firm called time on a 10-year foray into the North Sea last month by agreeing to sell the portfolio it had accumulated in the area for just £120 million to Viaro Energy.

It made the move following months in which firms have slashed investment in the North Sea in response to the plunge in oil prices triggered by the coronavirus crisis. Brent crude is still selling for around $17 less per barrel than it fetched in January last year.

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The price that SSE agreed to accept was so low that it attracted attention in the City.

Regarding the implications for shares in SSE, analyst Mark Freshney at Credit Suisse noted: “Our TP (target price) falls by 25p, reflecting this low valuation.”

He pointed out that SSE had agreed to retain liability for around £235m decommissioning costs associated with the portfolio.

The implications of the deal for the North Sea oil and gas industry are sobering.

The portfolio that SSE is selling is made up of stakes in fields that were expected to help the company to secure years’ worth of gas, protecting it from unfavourable commodity price movements.

These include the massive Laggan Tormore development West of Shetland, which helped to fuel hopes there would be a boom in what remains a relatively under-explored area.

READ MORE: SSE plans bumper investment in West of Shetland gas fields

SSE saw so much potential in Laggan Tormore that it paid French giant Total around £670m for a 20 per cent stake in the asset in 2015. It then covered a share of the costs involved in bringing the Laggan Tormore finds into production in 2016.

SSE said it would book a profit on the deal agreed with Viaro. However, the company slashed around £300m off the valuation of its North Sea business last year following the plunge in commodity prices triggered by the coronavirus.

It had cut £160m off the value of the portfolio in 2016 citing declining wholesale gas prices.

Remember, firms operating in the North Sea found themselves stuck in a deep downturn amid the slump in commodity prices from 2014 to 2016. This started after growth in production ran well ahead of demand.

SSE spent months trying to sell its North Sea portfolio after deciding to focus on renewable energy generation and related networks.

The company withdrew from the business of selling gas and electricity to consumers in January last year by offloading its household supply to Ovo in a £500m deal.

Some might think the deal agreed with Viaro had a whiff of desperation to it.

The price agreed sends a signal that the appetite for North Sea assets is limited, to put it mildly.

Sector watchers will likely find the fact that SSE struggled to sell gas assets particularly concerning.

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Firms operating in areas such as the North Sea have faced increasing pressure to give up on exploration and production work from environmental activists.

However, industry champions have underlined the potential for gas to play a key role in the transition to a cleaner energy system. They reckon gas-fired power generation could be used in place of more carbon-intensive coal to meet demand for energy while the required renewables capacity is developed.

Those who think the development and production of North Sea oil and gas assets can make an important contribution to energy security in the UK and to the economy may take heart from the fact that SSE did eventually find a buyer for its portfolio.

The involvement of Viaro may lead some to hope that newcomers could help to take up the slack that will be left by the departure of big fish such as SSE from the North Sea.

Some independents played an important role in helping to maintain activity in the North Sea amid the last downturn by acquiring assets from bigger players who appeared to be cooling on the area.

Private equity-backed firms such as Chrysaor and Siccar Point Energy bought bumper portfolios from the likes of Shell and Austria’s OMV.

In February last year Rockrose Energy clinched a £107m deal to buy US heavyweight Marathon Oil’s North Sea portfolio.

Viaro Energy made its first move into the North Sea in July last year by acquiring Rockrose for around £250m.

READ MORE: £250m takeover provides vote of confidence in North Sea amid coronavirus crisis

Viaro is led by an Italian entrepreneur, Francesco Mazzagatti, who said he saw Rockrose as a platform for growth in the North Sea.

But those who hope newcomers could help breathe fresh life into the North Sea may find there are not many more Viaros out there.

Viaro is part of a successful oil trading group and has won backing for its move into the North Sea from investors based in Abu Dhabi.

Firms that want to raise funding for North Sea projects on public markets may find it increasingly hard as institutions look to increase investment in renewable energy and related sectors.

Private equity funds that backed North Sea firms in the last downturn may be keen to get at least some of their money back before long.

Against that backdrop, Viaro’s foray into the North Sea will be monitored by those wondering about the outlook for the hard-pressed supply chain.

The company could run the business for cash without risking money on new developments.

The assets Viaro acquired from SSE include a stake in the bumper Glendronach find, which was made West of Shetland in 2018.

Another energy giant that is looking to exit the North Sea will be following developments closely.

READ MORE: Scottish Gas owner slashes valuation of North Sea business

Centrica was reported last month to have resumed efforts to sell its Spirit Energy business, which controls assets acquired through the £1.3bn purchase of Aberdeen’s Venture Production in 2009.

Centrica launched the sale process in 2019 then put it on hold in April amid turmoil in oil and gas markets.

Spirit made a costly investment in the West of Shetland area by acquiring a stake in acreage held by the pioneering Hurricane Energy in 2018, when it agreed to fund $180m drilling costs.

Hurricane stoked huge excitement about West of Shetland by making finds in a layer of rock that had received little attention.

However, the company has seen its share price plunge from 46p in November 2019 to less than 5p after suffering a series of setbacks.

In September Hurricane posted a $300m first half loss after slashing estimates of the amount of oil held in the key Lancaster and Lincoln finds.

Last month the company warned that “no value” could be returned to investors from the Lancaster field if it is unable to secure additional funding for its further development.