Shell sounds out banks and buyers on North Sea assets

Divestments on cards to meet $30bn disposal plan after takeover of rival BG. Picture: Getty
Divestments on cards to meet $30bn disposal plan after takeover of rival BG. Picture: Getty
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Oil giant Shell is paving the way for the sale of a slice of its North Sea business as part of the $30 billion (£21bn) asset disposal programme it pledged after its recent £35bn takeover of rival BG.

It is understood several leading investment banks have pitched for the North Sea mandate, a basin where Shell has about 2,400 staff either directly or through contractors, with Bank of America Merrill Lynch spearheading the process.

Shell’s global asset management sale programme remains the responsibility of investment banking giant Lazards. A Shell source said yesterday: “When we took over BG we committed to a $30bn asset disposal programme.

“The North Sea is under review but so too is everything else. We have to make the cuts somewhere.

“Lazards continue to oversee the wider review, but other banks are at liberty to bid for the work. We choose banks on a project-by-project basis.”

Reports at the weekend said Bank of America Merrill Lynch had held early talks about the possible sale of North Sea assets to Sam Laidlaw, the former boss of Scottish Gas-owning Centrica, who has launched the $5bn Neptune Oil & Gas fund to buy energy assets.

Analysts said it was unlikely that Shell, which has major sites at St Fergus and Mossmorran in Scotland, would seek to totally exit the area.

But since the oil price began its slide from more than $100 a barrel in the summer of 2014, compared with the $40 it was trading at last Thursday, before the Easter weekend, more than 65,000 North Sea workers have been made redundant as companies have gone bust or mothballed projects.

It is thought Shell would be keen to keep newer developments, including west of Shetland, but look to sell older, more mature assets where the infrastructure is also creakier.

One analyst said: “It would not surprise me at all to see Shell try to sell a fair amount of what it now probably regards as non-core in the North Sea following the BG deal.

“It is difficult to make the arithmetic add up in the region and $30bn of divestments is quite a hefty target to meet, even if it is worldwide.

“And the thing is, Shell has such a presence in the North Sea it could achieve those sales, tidy up the assets, and still be left with a pretty tangible presence there.”

Sir Ian Wood, former chairman of Aberdeen-based oil services business Wood Group, gave a warning at the weekend that tens of thousands more jobs could go in the North Sea before the crisis is over.

It is believed Shell is stepping up the pace of its analysis of what assets it keeps and disposes of given the marginally better backdrop for divestments due to the recovery in the oil price from a low of $28 a barrel in January.

The Chancellor’s tax cuts for the North Sea in his recent Budget are also seen as helping buyer interest.