North Sea deals position INEOS
as major producer, pipeline operator
Chemicals conglomerates pursuing upstream, midstream synergies
After a long quiet period for North Sea sset deals, the market has ignited this year. BP, Shell, ExxonMobil, and ENGIE have agreed to sell wide-rang- ing production interests, not solely in
mature fields, offshore the UK and Norway.
The buyers are mostly small to mid-range
companies managed by industry old hands,
supported by private equity.
One exception is the London-based INEOS
Group, established 20 years ago and now one
of the world’s leading manufacturers of petro-
chemicals, specialty chemicals and oil prod-
ucts with annual turnover of around $40 billion
and 105 manufacturing sites worldwide. The
privately-owned company, led by chairman
and controlling shareholder Jim Ratcliffe, had
diversified into North Sea gas field production
in October 2015 when it acquired interests
in 12 UK fields held by Germany’s DEA and
Fairfield Energy, all close to INEOS chemical
plants in northeast England. The main producing fields were Breagh and Clipper South.
Earlier this year, the company
announced two further deals that
would shift it several positions up
the North Sea E&P hierarchy. The
first, valued at $250 million, concerned a transfer of ownership and
operation from BP of the 235-mi
(378-km) Forties Pipeline System
(FPS) and associated pipelines and
facilities in the UK central North
Sea. BP built the FPS in the mid-
1970s to transpor t oil from the Forties field to
a refinery in Grangemouth, central Scotland.
Today the system handles liquids and gas
production from 85 UK and Nor wegian fields
close to the pipeline route, with oil throughput
last year averaging 445,000 b/d (the capacity is
575,000 b/d). In 2005, BP sold Grangemouth
and related chemical plants to INEOS. Under
the current transaction, INEOS will also as-
sume ownership of the associated Dalmeny oil
export terminal; the Kinneil terminal and plant
that receives and processes the FPS gas; the
Forties Unity (riser) platform; and other as-
sociated offshore and onshore infrastructure.
Soon after the BP announcement, INEOS
reached an agreement to acquire Copenha-
gen-based DONG Energy’s North Sea area
oil and gas business for up to $1.30
billion. The portfolio comprises
around 570 MMboe of proven
and potential oil and gas reserves,
with production of around 100,000
boe/d last year. The assets include
interests in two of northwest Eu-
rope’s major offshore gas/conden-
sate field developments, Ormen
Lange in the Norwegian Sea and
Laggan-Tormore west of Shetland.
According to Geir Tuft, CEO of the newly
established INEOS Oil & Gas division, the
company will finance both acquisitions via a
combination of cash reserves and debt financ-
ing. Offshore spoke to him about the company’s
plans for its growing North Sea business.
Of fshore: The new organization is a step-change forward from the previous INEOS
Breagh division, which you also oversaw.
Can you explain how the new management
structure will operate?
Tuft: We have established INEOS Oil &
Gas as an organization to manage Breagh,
Clipper, and the assets we expect to acquire
from DONG E&P during the current quarter,
assuming approvals from the national regula-
tors of Denmark, Norway and the UK, and
compliance with the EU’s competition process.
A senior team of three reports to myself as
CEO of the new division on issues such as
structure, finance, and merger and acquisition activity. Other individuals will retain their
current roles as heads of specialist technical
departments such as subsurface engineering.
Forties is more of a midstream business
which will be renamed INEOS FPS, under
the stewardship of Andrew Gardner as CEO.
Although the business has strong links to the
North Sea, with various major oil companies
exporting their production through the Forties
Pipeline System, it also connects physically
to the chemicals and refinery assets we own
in Scotland. Our ambition is to complete this
transaction during the third quarter follow-
ing regulatory approvals from the Oil & Gas
Authority and clearance for our safety case pro-
cess from the UK Health & Safety Executive.
The Siri platform in the Danish North Sea.
(All images courtesy INEOS)