New player seen as vote of confidence in North Sea future

North Sea industry leaders yesterday hailed the launch of a new exploration and production business as a vote of confidence in the investment potential of the UK Continental Shelf.
A bright future for the North Sea is predicted. Picture: Ivar LangvikA bright future for the North Sea is predicted. Picture: Ivar Langvik
A bright future for the North Sea is predicted. Picture: Ivar Langvik

Spirit Energy, a joint venture which combines Centrica plc’s E&P business with Oslo-based Bayerngas Norge AS, is planning to invest up to £600 million a year.

Although the combination of the two portfolios across the North Sea, Norway, the Netherlands and Denmark is expected to generate £100m-£150m of synergies, Spirit said it was also keen to expand through further consolidation and joint ventures.

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Chief executive Chris Cox, who previously led Centrica’s oil and gas business, said there were opportunities “right across the region to maximise our combined assets and build our portfolio further”.

“In the UK North Sea, our teams in Aberdeen are overseeing new wells to extend the life of our existing fields like Chestnut, and collaborative efforts with fellow operators are opening up prospects previously thought uneconomic,” he said.

“I have a lot of confidence in where we are heading. There are still 20 billion barrels of oil and gas to go after in the UK alone, and new licensing rounds opening up fresh opportunities in Norwegian waters.

“If operators and the supply chain take the right steps then the region can have a bright future, and I look forward to us playing our part in making it a reality.”

Centrica owns 69 per cent of Spirit Energy, with Bayerngas Norge’s former shareholders owning 31 per cent. The merger plans were first announced in the summer.

Production from the combined portfolios is expected to be around 50 million barrels of oil equivalent (mmboe) from 27 producing fields. Total 2016 year-end proved and probable reserves and resources were 625 mmboe.

Deirdre Michie, chief executive of industry body Oil & Gas UK, welcomed the arrival of a new independent operator to the North Sea. “The launch of Spirit Energy is another positive sign of the strengthening belief in the future of this basin. It comes at a time of much merger and acquisition activity clearly signalling the investment potential of the UK Continental Shelf,” she said.

“Billions of barrels of oil and gas still remain within the basin. We need a diversity of companies with fresh ideas and innovative thinking to ensure we make the most of our own indigenous resources, which are vital for helping to meet our energy needs, and which also support hundreds of thousands of UK jobs.”

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Spirit employs more than 700 people with offices in Aberdeen, Sevenoaks and Windsor, Oslo and Stavanger in Norway, Hoofddorp in the Netherlands and Copenhagen in Denmark. It has interests in 27 producing fields and more than 70 exploration licences.

The business also owns and operates the Barrow Gas ­terminals in the UK.