Chevron is preparing to affirm its commitment to the North Sea, restarting a bidding process to help unlock the region’s single biggest undeveloped field and considering extending the life of one of its key assets in UK waters.
The US oil major is looking again at developing the Rosebank oil and gas field north-west of the Shetland Islands, which it holds a majority stake. It was discovered in 2004 but higher costs owing to the deep water and hostile weather have deterred advancements.
Chevron has been working to reduce project costs since the oil price crash of mid-2014 but its cancellation of a $1.8bn order last year of a floating production, storage and offloading vessel (FPSO) for the field raised fears it would turn its back on the development.
Chevron said it expected to relaunch the tender process for the production vessel later this year.
Several oil majors and utility companies have been selling assets in the North Sea, including BP, Royal Dutch Shell, Engie of France and Denmark’s Dong Energy, driving concerns that large companies were retreating from the region.
The area west of the Shetlands — where Rosebank is situated — is of particular interest to many oil majors as sizeable discoveries are still possible. Shell, BP, ExxonMobil and Statoil picked up licences in the area this year. while Hurricane Energy, an Aim-listed company, has made discoveries west of the Shetlands which when totted up exceed Rosebank in size.
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Regulators are considering new proposals by energy services firms Wood Group and Amec Foster Wheeler to address competition concerns over their planned £2.2bn merger. The firms have agreed to sell a range of assets to ease the path of the deal.
The move comes after the UK’s competition watchdog the ‘Competition and Markets Authority’ found the merger could reduce competition in the supply of services on the UK Continental Shelf (UKCS). It told the firms to provide a proposed remedy or face an in-depth investigation.
The CMA argued the merger would cut the number of major players currently active in these markets from four to three, and that competition from other suppliers “may not be sufficient to mitigate competition worries”.
The new proposals would see Amec Foster Wheeler sell off “almost all” assets which contribute to engineering, construction and maintenance services in its upstream offshore oil and gas business in the UK.
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Royal Dutch Shell and BP have declared confidence in the future of North Sea oil and gas production after deep cost cuts that executives say have pulled the basin back from the brink of precipitous decline.
Bob Dudley, BP chief executive, told the Financial Times that his company’s commitment to the North Sea remained “rock solid” and highlighted the group’s plan to double its UK offshore production to 200,000 barrels per day by 2020.
Ben van Beurden, chief executive of shell, has signalled that he too is once again viewing the North Sea as an investment opportunity, despite selling more than half of the group’s UK production to Chrysaor, a small UK company backed by US private equity funds, for up to $3.8bn in January.
Last month, Mr van Beurden identified the Penguins field in the northern North Sea among a handful of projects that Shell would consider giving the green light to in the next 18 months.
The positive rhetoric reflects a gradual lifting of the gloom that has hung over the North Sea since the collapse in crude prices in 2014 exposed the region’s high costs, ageing infrastructure and declining production.
Conditions remain difficult throughout the North Sea supply chain, especially for oilfield services companies that were forced to cut sharply their rates as activity levels dropped.