(Alliance News) - Ithaca Energy PLC on Friday said it signed an agreement with Shell UK Ltd, which outlines a marketing process for Shell's 30% working interest in the Cambo oil and gas field.
The North Sea oil and gas operator said Cambo, which is located near the Shetland Islands, is the second-largest undeveloped oil and gas discovery in the UK North Sea.
The deal provides an option for Shell to sell any remaining proportion of its own stake following the conclusion of the marketing process, which will run six months from May 4, the day in which the agreement is dated.
Ithaca has entered into the option to acquire the option stake at around USD1.50 per barrel of oil equivalent of resource volumes being acquired under the development plan.
To enable the successful progression of the project towards final investment decision, Ithaca noted three possible outcomes under the agreement: for Shell to market and sell a portion of its 30% working interest in Cambo, or the entire 30% interest; for Shell to sell any remaining portion of its own stake, which is not sold to a third party, to Ithaca, in the event that Shell does not sell its entire 30% working interest; and for Shell to sell its entire 30% working interest and, if a potential buyer wanted a greater share of equity, for Ithaca to sell up to just under 20% of Ithaca's working interest in Cambo.
In all sale scenarios, Ithaca would retain at least a 50% working interest in Cambo and will remain the operator of the asset, it said, adding the development provides Ithaca with long-term production growth at a low expected unit operating cost per barrel.
"With its modern, energy efficient design and potential for electrification, Cambo could be one of the lowest-emission intensity assets in the North Sea. The field is expected to produce at less than half the CO2 intensity than the average UK field," Ithaca said in a statement.
Ithaca Chief Executive Officer Alan Bruce added: "Our agreement with Shell represents a meaningful step towards the development of Cambo...a key asset in helping maintain the UK's future energy security. Securing a new owner for Shell's stake is an important step in Ithaca Energy progressing to final investment decision. Ithaca Energy's primary strategic focus is to maximise sustainable shareholder returns through the delivery of our 'Buy, Build and Boost' strategy, including the future development of Cambo.
"Ithaca Energy remains committed to investing in the UK North Sea, however, the impact of the amended energy profit levy and the fiscal instability it has created continues to constrain our ability to invest. We are actively engaging, in a constructive manner, with the UK government in pursuit of the fiscal stability required to make critical investment decisions that will support the UK's long-term energy security."
Shell's Senior Vice President for UK Upstream Simon Roddy said the London-based oil major wished Ithaca well in the future development of the field, arguing it "will be to maintain the UK's energy security and to sustaining domestic production of the fuels that people and businesses need".
Shares in Ithaca were down 1.7% to 149.80 pence each in London on Friday morning, while Shell was up 1.6% to 2,381.11p each.
By Greg Rosenvinge, Alliance News reporter
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