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BLOOMBERG: North Sea Companies May Sell More Oil, Gas Fields Than in 2005

(Bloomberg) — Oil companies will probably sell at least as many U.K. North Sea assets as they did in 2005 to cash in on high prices and get rid of maturing oil and gas fields, a U.K. acquisitions consultant said.
The U.K. had 28 offshore-asset sales last year, worth about $5 billion, including a $3.5 billion sale by Kerr-McGee Corp. This year, Royal Dutch Shell Plc and other major oil companies will probably sell the most assets while mid-sized European and North American independent companies, start-up explorers and utilities are the likely buyers, said Paul Willcocks, managing director of London-based consultant Harrison Lovegrove & Co.
“The overall value of asset sales may be less in 2006 and you may see more deals in the $50 million to $100 million range,'' Willcocks told reporters at an Energy Institute conference in London. “Major oil companies will remain the main sellers.''
Shell, Exxon Mobil Corp., BP Plc and Total SA, who together own 42 percent of the U.K.'s oil and gas reserves, down from about 50 percent four years ago, are gradually turning to new regions where larger discoveries can be made.
“The U.K. is not where our future growth is going to come from,'' said Martin Tiffen, Total's U.K. business development director. “The U.K. is already one of the highest cost basins in the world and the only direction is up.''
Another 37 percent of U.K. reserves are held by 10 companies, among them majors, independents and utilities, including BG Group Plc, Chevron Corp., Talisman Energy Inc. and Centrica Plc.
The biggest buyers in 2005 were A.P. Moeller-Maersk A/S and Centrica, which bought Kerr-McGee's North Sea fields, and E.ON AG's Ruhrgas unit, which bought Caledonia Oil & Gas Ltd.'s assets for $834 million.
Russians, Chinese Ignore
Russian and Chinese companies are “not interested'' in the North Sea, Willcocks said. Indian companies probably would only consider an exploration joint venture with a major oil company. North American independents, Japanese companies, U.K. startups and European utilities are gaining more acreage, though.
Japan's Osaka Gas Co. and Mitsui & Co. are among companies considering entering the U.K. North Sea for the first time, according to Harrison Lovegrove's analysis. Other possible new entrants include Pioneer Natural Resources Co. and Canada's Pengrowth Energy Trust.
Buyers typically assume Brent crude oil will be worth at least $35 to $40 a barrel for the next few years, said Willcocks, whose team has advised on 21 energy asset sales around the world in the past two years.
Mature Business
Shell sold the most U.K. fields over the past three years, though it also participated in the largest number of exploration and appraisal wells over that period.
“We cannot ignore the fact that it is a mature business,'' Robert Jan van Melson, Shell's business development manager for Europe, told the conference. With maturing fields, “we are not always getting the best value. There are other companies that can extract more value.''

Some types of drilling rigs in U.K. waters now cost $300,000 to $350,000 a day, compared with about $80,000 in 2004, Total's Tiffen said.
The U.K. has extracted about 35 billion barrels of oil and gas from the North Sea and 21 billion to 27 billion barrels remain, said Joan MacNaughton, director general of energy at the U.K.'s Department of Trade and Industry.
Total's Tiffen said the U.K. would benefit from having a cabinet-level energy minister. The country has a minister of state for energy, Malcolm Wicks, who reports to Trade and Industry Secretary Alan Johnson.
“Energy is clearly now very much on the table for general discussion in the media,'' Tiffen said. “An energy minister that could look across the table at the Chancellor of the Exchequer would be a good thing.''
To contact the reporter on this story:
Stephen Voss in London at [email protected]

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