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LONDON (Alliance News) - BP PLC Thursday agreed to sell its equity in the Central Area Transmission System gas pipeline and processing facility in the UK North Sea to Antin Infrastructure Partners for GBP324 million, a deal that comes after a review into the North Sea oil and gas industry suggested that infrastructure be owned by specialist infrastructure companies or be co-owned by several oil producers.
The CAT system, also known as the CATS pipeline, is a natural gas transportation system from the UK North Sea to a processing facility in Teeside, England. BP currently operates the system, which is 36.2% owned by BP, 0.6% by ConocoPhilips of the US and 0.3% by Italy's ENI SpA.
Antin already owns the remaining 62.8% stake, which it acquired in July 2014, meaning it will end up with 98.9% after the deal goes through. BP expects it to close before the end of 2015.
Antim will pay BP an initial GBP302 million and a deferred GBP22 million subject to post-closing adjustments, BP said.
BP said the sale will not affect its capacity to use the infrastructure owned by the CATS business.
Antim also released a statement Thursday, saying the Antin CATS management team will be lead by Andy Hessell, who was most recently vice president of commercial operations in the North Sea and Angola for BP. Hessell had left BP in January.
Other current BP staff working at the business unit will be transferred to the new company owned by Antim.
The CATS pipeline has the capacity to handle 1.7 billion standard cubic feet of natural gas per day through 20 customers, including "most of the major North Sea gas producers", and currently serves 34 producing fields. In 2013, CATS transported 13% of UK domestic gas production, according to Antim.
The CATS pipeline begins at a riser platform adjacent to the BG Group PLC-operated Everest gas field in the Central North Sea and transports gas some 250 miles to the CATS processing terminal in Teesside on the North East coast of England.
"CATS has been a great business for BP but, aligned to the recommendations of the Wood review, we believe securing this new owner will ensure a better long-term future for this key piece of North Sea infrastructure," said Trevor Garlick, BP's regional president for the North Sea.
"The North Sea is an important region for BP. Our strategy here is to focus our resources and investment to create an efficient, sustainable and competitive business which will contribute to UK energy security for many years to come. Key elements of this are the completion of our major projects in the central North Sea and Shetland area, and continued management of our portfolio," he added.
The Wood review refers to a UK government review into the North Sea oil and gas industry that was headed by Ian Wood. He had warned that the recent slide in the oil price was a real issue for the North Sea, threatening jobs, assets and confidence.
In the final review, which was released in February 2014, Wood suggested the UK North Sea follow the Netherlands by having infrastructure owned by companies which are solely focused on operating pipelines and other infrastructure rather than oil and gas producers such as BP.
"The Netherlands has a number of infrastructure companies such as NOGAT BV, whose business model is solely to operate offshore pipeline and onshore processing facilities, and therefore actively seek to attract new transport business," said Wood in his review.
Antim Infrastructure Partners is a management company of infrastructure funds with assets across Europe, making it solely focused on the infrastructure business rather than oil and gas production. Its other investments include Roadchef, a UK motorway operator, and Westleigh Group, the second-largest independent owner and operator of crematoria in the UK, according to the company.
An alternative is for several oil producers to own and develop infrastructure, which would in turn promote better and more economic access to the pipelines and infrastructure to third parties, something Wood has urged the industry to promote.
"Fundamental to the (current) problem is a misalignment of commercial and technical interests between the owner of the hub platform and infrastructure and the party seeking access to process and transport their well stream," Wood had said. "The hub owner typically views the provision of processing and transportation to a third party as a low value opportunity, particularly when they have no equity interest."
"As a result, there is little incentive for the hub owner to take on business which could add risks to their own operations and use up capacity on their facilities," he added, highlighting that this hits smaller operators in the North Sea the most.
Wood also said that infrastructure in the North Sea, especially in the West of Sheltand area and in the Central North Sea, needs to be developed and expanded to allow new and also smaller fields to become economic. Wood claimed in the report that between 500,000 to 2.0 million barrels of oil equivalent could be put "at risk" from early decommissioning based on the current infrastructure. This would require capital expenditure, something that BP has cut back on recently due to the fall in oil prices.
Antim said the strength of the CAT system leaves it with plenty of potential for growth, and the infrastructure company said it will "grow and develop CATS through additional investment", it said.
"Investment in infrastructure such as CATS is key to government and industry?s aim to maximise the economic recovery and realise the considerable potential of the UK Continental Shelf. We look forward to collaborating closely with our partners in industry, government and the Oil and Gas Authority to operate in one of the most promising areas of the North Sea," said Stephane Ifker, a partner of Antim.
BP shares were up 0.3% to 481.35 pence per share on Thursday afternoon.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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