End of an era at Sullom Voe
by Tom Morton -
It was, said Gary Robinson, leader of Shetland Islands Council, an ending and a new start. BP had just announced, on 24 January, that after almost 40 years, it was handing over management of the giant Sullom Voe Oil Terminal to Enquest, a specialist in end-of-life management of hydrocarbon resources.
“This is the end of an era for the oil and gas industry but it is also the beginning of a new era,” said Mr Robinson. “The significance for Shetland cannot be underestimated. This is a positive opportunity for the future of Shetland. It’s a big change for Shetland and for SVT. EnQuest are known for managing end of life assets and extending their life. They will have the opportunity to focus on SVT and attracting new business, particularly from the West of Shetland. The Council and the wider Shetland Partnership will be working with them to realise that opportunity. We are now looking to EnQuest to develop the arrangements at SVT to provide a competitive environment for opportunities to the west of Shetland.”
BP agreed to sell part of its interests in the Magnus oil field and some associated pipeline infrastructure in the UK northern North Sea and in the Sullom Voe Terminal (SVT) on Shetland to EnQuest.
Included in the agreement are: 25% of BP’s 100% stake in Magnus, 25% of BP’s interests in a number of associated pipelines and a 3% interest in the Sullom Voe Terminal from BP Exploration Operating Company Limited’s (BPEOC) current total 12% stake. The sale price of $85 million is expected to be met by EnQuest from the sharing of future cash flows from the assets and the agreement will not include any upfront payment to BP.
Subject to partner, regulatory and other third party approvals, operatorship of both Magnus and SVT will transfer from BP to EnQuest on completion. The sale will not affect BP’s rights to capacity in SVT.
Malcolm Bell, SIC Convener, said: “We have a positive relationship with BP which we have sustained over many decades. We now look to develop that with EnQuest. We look forward to developing with them a sustainable future for the Sullom Voe Terminal.”
Alastair Cooper, Chair of Development, said: “The Council will maintain its focus on the protection of Shetland’s environment, and we will work with EnQuest through SVT Ltd. to embed this in the transfer of the existing legal agreements with the operator.”
BP group chief executive Bob Dudley commented: “EnQuest’s experience of investing in and extending the life of mature assets in the North Sea make them a natural operator of Magnus and Sullom Voe in this later phase of their life. We believe this will enable them to prolong the life of the assets, benefiting the region and creating additional value for both EnQuest and BP shareholders. In addition to investing in and growing our core businesses, BP will continue to seek innovative opportunities such as this to work with partners to maximise value creation from our entire portfolio.”
Mark Thomas, BP North Sea Regional President said: “In recent years, we have been focusing our North Sea portfolio around core assets west of Shetland and in the central North Sea - bringing new fields into production, redeveloping and renewing existing producing facilities, acquiring new acreage and interests through licence rounds and farm-ins and selling some of our mature assets to those who see greater strategic fit with their businesses. Sullom Voe and Magnus have been great businesses for BP, but to maximise the economic life of these important assets, we believe this deal will offer them a better long-term future.
“With their integrated skills, operational scale, cost structures and high levels of operating efficiency we have seen what EnQuest can do on the Thistle, Deveron and Don fields that were previously operated by BP. We believe this is a good example of having the right assets in the right hands, offering new opportunities for the assets and benefitting the UKCS, in the spirit of Maximising Economic Recovery (‘MER UK’).”
Oil production from the BP-operated Clair field will continue to be exported through SVT, and the new Clair Ridge development will also export oil to the terminal when it comes on-stream. Gas produced from the Foinaven and Clair fields will also continue to be processed through SVT. Gas from the re-developed Schiehallion and Loyal fields will export to SVT when they are brought back into production in the coming months.
SVT and Magnus will transition to EnQuest as fully operational entities, with those staff who operate and support the assets expected to transfer with the businesses. Their contractual terms and conditions are protected under UK Transfer of Undertakings (TUPE) regulations. Around 100 BP staff are currently associated with Magnus and associated infrastructure and approximately 240 with SVT.
Subject to the receipt of regulatory and other third party approvals, BP aims to complete the sale and transfer of operatorship during 2017.
Posted in: Oil and Gas