LONDON – BP PLC has approached potential buyers of its oil-and-gas production assets in the North Sea, people familiar with the matter said, around 50 years after the once-state-owned company helped pioneer deepwater extraction there.
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Some of the people said the talks included essentially the full range of BP's currently producing assets in the North Sea, where the London-based company is the top producer. The potential buyers include private-equity firms, the people said.
The discussions are at an early stage, the people said, and the value of the assets isn't clear.
"At the minute, there's been initial conversations," one of the people said.
BP said it remained "committed to the U.K. North Sea, and any rumors to the contrary are simply false." The company said it was in the middle of a plan to ramp up its U.K. North Sea production to 200,000 barrels a day and pointed to important new developments there west of the Shetland Islands.
"Our aim is to sustain a material business in the region for decades to come," BP said.
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It isn't clear how much of BP's North Sea assets the company would be willing to part with. In addition to its North Sea assets that produce at least 140,000 barrels a day, the company has other North Sea projects that are planned to come online in future.
North Sea production peaked in the 1990s and it has become more expensive to extract the remaining barrels from aging fields. Production began declining after 2000, although it recently perked up, after a series of government tax breaks encouraged investment.
Any move to sell a large portion of its North Sea assets would be a departure for BP. The company has been a leader in the North Sea since the mid-1960s, when exploration and production began, helping make the region one of the world's great petroleum basins.
Like other big oil companies, BP has been reviewing its assets after a three-year rout in oil prices, with high-cost regions including the North Sea particularly in focus. It already sold part of its interest in the North Sea's Magnus field to EnQuest PLC earlier this year.
Royal Dutch Shell PLC, previously the region's top producer, halved its North Sea output after striking a $3.8 billion deal with private-equity backed Chrysaor in January.
"The majors have reduced spend because they can't get the returns in the North Sea compared to more attractive, lower-cost opportunities globally, " such as Brazilian deep water and U.S. shale, said Fiona Legate, an analyst at Wood Mackenzie, the Scottish energy consultancy.
Wood Mackenzie forecasts U.K. production will rise to 1.87 million barrels a day in 2017, from 1.67 million a day last year, as a result of new developments starting up and increased production efficiencies.
"Without material discoveries going forward we'd expect production to go back into terminal decline around 2018 in the U.K.," said Ms. Legate.
Private-equity firms are coming in and extending production on fields and "that happening more often will add up and help squeeze those extra barrels out from the North Sea," added Ms. Legate.
Sarah Kent contributed to this article.
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(END) Dow Jones Newswires
July 20, 2017 08:05 ET (12:05 GMT)