Independents making their move into the North Sea

By OGJ editors
HOUSTON, May 21 -- The UK North Sea operator profile is undergoing a transformation as independent oil and gas companies increasingly buy the integrated oil companies' interests in North Sea properties.

It's a trend similar to one previously witnessed in the Gulf of Mexico, said Robert E. Patterson, a lawyer with Vinson & Elkins LLP's London office, who made a May 15 presentation at his company's offices in Houston.

"Are the independents scavengers or mature field experts? It depends on whom you ask. There is a time in the life of every field when you need a different type of operator," Patterson said. Independents have different value perceptions and can afford to invest in fields in which the majors are losing interest.

Upstream consolidation has resulted in the supermajors trying to fulfill spiraling production growth goals. Consequently, many of them no long consider declining North Sea fields to be a good investment.

Meanwhile, Apache Corp., Houston, entered the North Sea with its purchase of 96.14% of the Forties oil field from BP PLC (OGJ, Jan. 20, 2003, p. 32). UK independent Perenco PLC has bought North Sea properties from both BG Group PLC and BP (OGJ, May 19, 2003, p. 39).

These deals reflect a trend that Patterson expects to continue for at least a year. Apache boosted its global production by 15% with the Forties field, which represented only 1.5% of production for BP, he added.

The changes in UK North Sea companies also mean changes and opportunities within the oil service sector, he said.

Meanwhile, the UK government is moving to encourage exploration and development of the remaining reserves, he said.

"Change is slow, bit it is happening," Patterson said, adding the UK government is periodically readjusting its fiscal terms for oil and gas companies.

"Independents tend to operate on tighter margins (than majors), but independents also outsource more. The service companies who can fit a niche and keep up with the independents' demand for innovation will prosper," Patterson said.

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