By Michael Kavanagh
BP, along with partners Royal Dutch Shell, ConocoPhillips and Chevron, is to push ahead with a ?4.5bn ($7.1bn) second-phase investment to develop one of the largest North Sea oil fields.
Approval from the UK government to develop the Clair field, west of the Shetland Islands, will see the total amount of planned spending on BP-led North Sea oil projects announced this year rise to almost ?10bn.
The large commitment to capital spending centred on the UK, follows a disposal spree by BP prompted by last year’s Deepwater Horizon spill crisis in the Gulf of Mexico. BP has indicated it plans to exceed the $30bn target it had set for disposals.
As part of the disposals and its strategy of focusing on higher-growth assets, the oil major said in February it was to sell ageing oil and gas fields in Britain valued at about $1bn, including the first ever commercial discovery in the UK sector of the North Sea.
However, the company, along with other oil majors, remains under pressure to ensure it has enough assets in development to guarantee medium-term supplies.
BP, whose share of the total investment in the four projects will be around ?4bn, said this represents the highest level of annual investment it has made into the UK North Sea to date.
Bob Dudley, BP group chief executive, said: “After some years of decline, we now see the potential to maintain our production from the North Sea at around 200,000-250,000 barrels of oil equivalent a day until 2030.”
BP and its partners added on Thursday that appraisal of an extension to the Clair field – South West Clair – had confirmed that the overall Clair field complex had more than seven billion barrels of oil and gas initially in place and that it was the UK’s largest hydrocarbon resource.
The companies face extremely tough conditions in the area. The Clair reservoir was discovered in 1977 but agreement with BP to begin developing the field was not agreed until 20 years later because of the high cost of extraction and technical challenges of the field.
This year, BP and its partners agreed plans for the ?3bn redevelopment of the Schiehallion and Loyal fields west of Shetland and the ?700m development of the Kinnoull field in the central North Sea. BP is working with partner RWE, the German utility, in a ?550m development of the Devenick gas field in the central North Sea.
BP said more than half the total investment in the projects is expected to be spent in the UK and they should, at their peak, add around 3,000 UK oil and gas supply chain jobs to the economy.
“After some years of decline, we now see the potential to maintain our production from the North Sea at around 200,000-250,000 barrels of oil equivalent a day until 2030,” said Mr Dudley.
“The region still offers competitive, attractive investment opportunities which we will pursue.”
He added: “The story of the North Sea oil industry has a long way yet to run. BP has produced some five billion barrels of oil and gas equivalent so far from the region and we believe we have the potential for over three billion more.”
“This investment is great news for Aberdeen and the country and provides a massive boost for jobs and growth,” said David Cameron, UK prime minister.
Shares in BP, still trading well below the 650p level struck ahead of the Deepwater Horizon disaster last year, fell 5?p to 406.45p in early trading on Thursday.
? The Financial Times Limited 2011