BP and EnQuest signed a US$85 million deal that will see EnQuest take over operatorship and 25% stake in the Magnus oil field in the North Sea, with a future option to take full ownership of the field.
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Image from EnQuest. |
The agreement also includes 25% interest some associated pipeline infrastructure in the area, and a small interest in the onshore Sullom Voe Terminal.
According to BP, the terms come with an option for EnQuest, exercisable between 1 July 2018 and 15 January 2019, to purchase BP’s remaining 75% interest in Magnus, a further 9% interest in SVT and the remainder of BP’s interests in the associated pipelines for a consideration of $300 million. Under this option, after the recovery of consideration and adjustments, BP would also retain 50% of net cash flows from these assets, up to a limit of $1 billion. The consideration for this further acquisition would be met by EnQuest through a mixture of cash and future asset cash flows.
Magnus is the UK's most northerly field, located 160km northeast of the Shetland Islands, mainly in Block 211/12a. The reservoir is estimated to contain 1.54 billion bbl, of which 869 MMbbl (56%) are recoverable, according to BP.
The Magnus acquisition holds gross reserves of 63.4 MMboe, 15.9 MMboe of additional 2P reserves net to EnQuest; and a gross production in 2016 of 16.6 MMboe/d, 4.2 MMboe/d net to Enquest.
The deal also includes an option for EnQuest to receive $50 million from BP in exchange for undertaking the management of the physical decommissioning activities for Thistle and Deveron, and making payments by reference to 6% of the gross decommissioning costs of Thistle and Deveron fields.
The deal is subject to certain regulatory, government authority, counterparty and partner consents; and is expected to transition operatorship in six to 12 months.
"This transaction capitalizes on EnQuest’s strengths in realizing value from the management of maturing oil fields, as underlined by BP’s confidence in proposing a change of operatorship to EnQuest,” says EnQuest CEO Amjad Bseisu. “Magnus is a good quality reservoir; it has large volumes in place, with potential for infill drilling and for the revitalization of wells, and scope for field life extension. It is a producing asset that would materially increase EnQuest’s reserve base. We are a natural strategic partner to BP for maturing assets and this innovative structure represents a natural evolution of EnQuest’s business."
“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,” BP Group Chief Executive Bob Dudley says. “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.”
According to Mark Thomas, BP North Sea regional president, Magnus has been great businesses for BP, but in order to maximize the economic life of the field, he says it will benefit EnQuest in the 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 Maximizing Economic Recovery,” Thomas says.
Oil & Gas UK Chief Executive Deirdre Michie says the deal opens a new chapter in the life of Sullom Voe and the productive life of Magnus. In addition, she says it sends a very positive signal on the opportunities available in the North Sea and is an indication of confidence that, even after producing oil for more than thirty years, this mature field still has more to give.
"The transfer of assets and infrastructure builds on a long-term trend to see 'the right mature assets' move into the right hands of established UK mature field operators and sees a fresh commitment to exciting development opportunities by established incumbent companies," Michie says.
Magnus
Magnus was discovered in March 1974 in acreage licensed to BP in the 4th licensing round. Oil was found 2709m below the seabed in a water depth of 186m. The discovery by the semisubmersible drilling rig Sedco 703 was made in the younger sands of the Upper Jurassic. The field was named after the Viking saint of Orkney - Magnus.
BP says that the water depth and hostile environment of the Northern North Sea put severe constraints on the development of the Magnus.
The UK supermajor’s development has consisted of asingle central combined drilling and production platform of conventional steel structure; seven subsea producing wells, capable of being converted to water injection, each with a remotely-controlled wellhead, and connected to the platform by a buried control umbilical and flow line; and a 24in crude oil pipeline from the Magnus field to the Ninian Central platform.
Subsequently it was decided that gas from Magnus, together with gas from the Thistle and Murchison fields, would be piped ashore using a joint pipeline linked to the Shell/Esso Far North Liquid and Associated Gas System (FLAGS), which runs to St Fergus in Aberdeenshire.
The Magnus jacket is the largest single piece steel structure yet to be designed and constructed for the North Sea.
Oil from the Magnus reservoir is recovered by 14 deviated platform wells. The produced oil flows to collector manifolds and is processed through two identical production trains.
In each train the oil passes through two separation stages at decreasing pressures to the main oil line booster pumps. Oil from the two trains is then combined, metered and exported to the Sullom Voe Terminal. Gas separated from the oil is cooled and compressed to recover valuable gas liquids. The gas is then dried, compressed and exported via the FLAGS line to St Fergus. Some of the processed gas is also used to power the platform. Produced water is cleaned and discharged to the sea.
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