BP Said to Approach Possible Buyers for North Sea Assets

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.

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 it isn't clear what the value of the assets is or which ones BP would ultimately part with.

"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 double 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.

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 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.

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com, Matt Jarzemsky at matthew.jarzemsky@wsj.com and Ben Dummett at ben.dummett@wsj.com

(END) Dow Jones Newswires

July 20, 2017 07:47 ET (11:47 GMT)