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Shell Exits Denmark’s Offshore Oil and Gas Sector

BY MAREX 2018-10-17 19:01:00

Following Chevron’s lead, Shell has decided to sell its interests in the Danish North Sea offshore sector. In an announcement on Wednesday, the Dutch oil major said that it will sell its shares in its Danish upstream sector division, Shell Olieog Gasudvinding Danmark, to the Norwegian Energy Company (Noreco). Noreco will pay $1.9 billion and assume Shell’s obligations in the Danish North Sea, including its share of the decommissioning and redevelopment costs for the overhaul of the Tyra platform.

In return, Noreco gains a 37 percent stake in the Danish Underground Consortium (DUC), the joint owner of most oil and gas leases and infrastructure in the Danish North Sea. It also gains Shell Olieog’s share of the region’s production, which amounts to 67,000 boe per day.

Shell is departing a market in which it has deep roots: it was a plankholding partner when DUC was founded in 1962, along with A.P. Møller and Gulf Oil. A.P. Møller-Maersk was DUC’s operator from 1974 until March 2018, when it completed the sale of its Maersk Oil division to Total. Chevron also agreed to sell its small stake in DUC to Total in September as part of a broader plan to wind down its North Sea operations.

Now that Noreco is a partner in DUC, it will participate in the redevelopment of the Tyra offshore facilities, which handle the consortium’s entire gas production (and about 90 percent of the gas produced in Denmark). Tyra East and Tyra West are linked by underwater pipeline to multiple satellite fields, and they serve as junction points for the transfer of gas to shore. They are more than three decades old, and then-operator Maersk announced plans to close them in 2016 due to excessive costs associated with their renovation. Through negotiations with the Danish government, DUC’s partners arranged a tax abatement plan to offset the cost, and the platforms’ topsides will be fully replaced by 2021. The redeveloped facilities are expected to produce an additional 200 million boe over their lifespan.

SOURCE

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