AMSTERDAM: Royal Dutch Shell (LSE: 0LN9.L – news) is to offload its holdings in 10 North Sea oil fields in a move worth up to £3bn.
The FTSE 100 energy firm’s latest divestment since its takeover of BG last year would mean its interests in Buzzard, Beryl, Bressay, Elgin-Franklin, J-Block, the Greater Armada cluster, Everest, Lomond and Erskine transferring to smaller rival Chrysaor.
Its 10% stake in Schiehallion is also included. The fields account for output of 115,000 barrels per day for Shell.
The firm said it expected the 400 workers affected would transfer to Chrysaor under the agreement, which remained subject to several approvals including regulatory scrutiny.
Under the financial arrangements, which Shell said would result in a financial gain for the company, Chrysaor would pay an initial £2.4bn followed by top-up sums linked to energy prices and potential future discoveries. It insisted its North Sea interests would remain “significant”, with a “strengthened presence” after the deal completes.
It pointed to production from the Schiehallion redevelopment and Clair Ridge project expected to come on stream at a time when energy prices have recovered following over two years in the doldrums. The weak price environment largely caused by demand failing to match high output – saw a barrel of Brent crude touch lows below $30 a year ago.
It has recovered to $55 today – still over 50% down on 2014 prices – a result of the OPEC cartel of oil-producing nations cutting output. The weak price environment led to thousands of North Sea job losses as firms downsized their operations.
Shell has not been immune from seeking cost-savings. It wants to reduce its asset base by almost £25bn in the wake of the £38bn BG deal. Andy Brown, Shell’s upstream director, said it remained committed to the North Sea.
“This deal complements the great strides we have made over the last two years in improving the competitiveness of our UK upstream business,” he said.
“We believe this deal is a vote of confidence in the UK North Sea and offers proof that the industry’s increasing competitiveness, and improvements to the fiscal and regulatory regime, are starting to produce positive results.
“It also contributes to the UK’s goal of maximising economic recovery of oil and gas from the UK North Sea, which will continue to be a source of energy, and revenue, for the country for many years to come.”
