Intelligence brief: North Sea infrastructure spending to rise; BP, Aker form Norwegian joint venture
Upstream oil and gas news you need to know
Deloitte expects PE-backed North Sea infrastructure spending
Expect a notable number of transactions in the North Sea oil and gas industry’s midstream sector, according to Deloitte.
Historically, big oil and gas operators developed and owned what they needed, transporting their oil discoveries through proprietary pipelines and refining it in their own processing plants. But driven by the North Sea basin’s age and the oil-price decline, infrastructure has become the go-to asset for divestment with private equity and energy-focused funds lining up to acquire these assets, according to Shaun Reynolds, Director, Transaction Services at Deloitte.
Deloitte’s 2016 European Infrastructure Investors Survey, published last week, found that pipelines were perceived to have had a better recent performance than most other types of infrastructure surveyed, including ports, telecoms, roads, gas/fuel storage, and waste. Only airports, water, and rail/metro had a higher number of respondents say they have performed well.
Pipelines were also found to have a higher internal rate of return than any other type of infrastructure, with about 14%. Renewables, to take an example of one other type of infrastructure, were found to have an IRR of about 12%, slightly less than in the previous survey in 2013 (pipelines were not included in the 2013 survey).
Reynolds said the involvement of private equity in pipeline infrastructure would mean the owners are wholly focused on making the most of the asset’s potential, which “can only be a positive step from a longevity perspective”. More infrastructure will be kept operational for longer, he said, explaining that these assets will be critical to extracting the remaining 20 billion barrels of oil sitting at the bottom of the North Sea.
“There’s a strong appetite out there for North Sea infrastructure – but only at the right price. Energy-focused infrastructure funds will be a likely source of investment and, as the oil price continues to take its toll and more operators are forced to divest non-core assets, deals will be done. It could be just what the industry needs,” he concluded.
BP, Aker form Norwegian joint venture
BP, Aker Capital and Det norske have agreed to form a Norwegian exploration and production firm that they estimate will grow production to more than 250,000 barrels-of-oil equivalent per day by the early 2020s.
Under the terms of the proposed transaction, BP Norge and Det norske will combine and be renamed Aker BP ASA. It will be independently operated and listed on the Oslo Stock Exchange, and will be jointly owned by Det norske’s largest shareholder Aker (40%), other Det norske shareholders (30%), and BP (30%). BP will also receive a cash payment of $140 million plus positive working capital adjustments as part of the transaction.
Bob Dudley, Chief Executive of BP Group, said BP and Aker have collaborated closely throughout the decades. Calling the Norwegian Continental Shelf “a significant opportunity going forward”, he said the deal demonstrated how BP can adapt its business model with strong and talented partners.
Offshore-supply vessels can cut thousands of dollars from fuel bill
Offshore supply vessels can save up to €21,000 ($23,700) on their annual fuel bill by running at optimal trim, a joint-development project in the Norwegian North Sea has demonstrated.
The comparative study documented potential energy savings created by using DNV GL’s trim-optimization tool ECO Assistant on a platform-supply vessel. The pilot vessel FAR SUN and her sister ship FAR SYGNA, both owned by Farstad and chartered by Statoil, took part in the six-month study.
Trim is the difference between the draft forward and the draft aft, according to OTEN Maritime Studies. If the aft draft is greater, the vessel is described as being trimmed by the stern, if the forward draft is greater, it is trimmed by the bow.
According to DNV GL, an automated onboard data-collection system gathered information about the required power, trim and fuel consumption on both vessels. This was sent to DNV GL and analyzed using the ECO Insight performance management solution. The results revealed that by using ECO Assistant, FAR SUN consumed an average of 4.3% less fuel than FAR SYGNA when operating between 4 and 14 knots. The greatest savings (over 5%) were achieved when the vessel was operating at speeds over 7 knots.
ECO Assistant contains a trim-power model, which is based on ship data and drawings that incorporates seven speeds, seven drafts and seven trim conditions, DNV GL said. The model includes speed-power and fuel-oil-consumption curves for the full speed range of the vessel, enabling accurate predictions of additional fuel consumption due to extra cargo or ballast.
More than 750 vessels worldwide use ECO Assistant, according to DNV GL.