* High costs, decommissioning hamper deals
* Shell not selling upstream assets at $48/bbl -CFO
* BP fails to sell stake in Forties pipeline -sources
* GRAPHIC-Assets on the market: http://tmsnrt.rs/1OehMq6
* GRAPHIC-Historic asset value: http://tmsnrt.rs/1SMFAqG
By Ron Bousso
LONDON, June 2 (Reuters) - When it comes to the North Sea,there is no such thing as an easy sale, even for oil giantsRoyal Dutch Shell and BP.
More than any other region in the world, the North Sea hassuffered greatly over the past two years as a 60 percent drop inoil prices, high operating costs, dwindling reserves and a toughtax regime has hit operators hard.
As a result, producers ranging from Shell and France's Total to smaller regional players such as Enquest and Tullow Oil have put dozens of assets in the regionon the block to boost their balance sheets.
But deals have been few and far apart. Buyers and sellershave found it hard to agree on the value of assets and how toshare the costs of dismantling and cleaning up of obsoletefields, known as decommissioning.
With around 30 percent of fields operating at a loss in 2016and others seeing razor thin margins, "almost all UK North Seaassets are up for sale," said Fiona Legate, senior UK upstreamoil and gas analyst at consultancy WoodMackenzie.
"There is however a limited pool of buyers," she added.
BP has struggled to sell a stake in its Forties pipelinesystem, one of the region's oldest and the main source for theeponymous crude used to price the global Brent crude benchmark.
Talks with Swiss-based chemical giant Ineos recentlycollapsed after the sides could not agree on how to price theasset, sources close to the negotiations said.
The Forties pipeline has a capacity to deliver over 1million barrels per day and serves over 50 offshore oil and gasfields in the central North Sea, according to BP's website.
But declining output has meant the pipeline operated at lessthan 40 percent of its capacity last year, WoodMackenzie says.
Ineos wanted BP and other producers using the pipeline tocommit to a fixed capacity fee that would guarantee revenue evenif output continued to decline, industry sources close to thetalks told Reuters.
BP however sought to pay on a per-barrel basis, they said.
"Buyers want something to protect them against a drop inthroughput," one source said.
The pipeline system remains on the market.
BP and Ineos declined to comment.
The UK North Sea was a trailblazer for the unlocking of newoil and gas resources deep under the sea. But since hitting peakproduction in the late 1990s, it has been in steady decline.
VICIOUS CIRCLE
Shell is starting an ambitious three-year $30 billion globalasset sale programme to pay for its $54 billion acquisition ofsmaller British rival BG Group in February.
In the North Sea, the company is planning to bundle severalassets in packages that will include mature fields along withmore attractive assets such as the Buzzard field and pipelines,banking sources said.
Bank of America Merrill Lynch will run the North Sea assetsales, banking sources said.
The Anglo-Dutch company held talks in recent months withNeptune, a North Sea-focused investment company headed by formerCentrica boss Sam Laidlow and backed by private equity fundsCaryle Group and CVC Partners.
Shell, Carlyle and Bank of America declined to comment.
Shell Chief Financial Officer Simon Henry remains confidentit can meet its target within around three years. Shell willfocus at first on selling infrastructure, refining and retailbusinesses that are less exposed to oil price fluctuations overproduction, or upstream assets, he said.
"If the oil price stays at $48 a barrel maybe (the saleprogramme) will take us a little bit longer. We are not chasingsales of upstream assets at $48."
Operating in the North Sea remains challenging even afterShell cut costs sharply in recent years, Henry said, adding thatwithin the region, some areas are more profitable than others.
"We've taken our costs down hugely and improved ourreliability and availability. So the performance today is muchbetter than it was two years ago but it is still not good,"Henry told reporters on May 24.
"In general it is high cost region in which you have to keepspending to stay in business and have significantdecommissioning and restoration costs."
An extended period of low oil prices also leads to anearlier decommissioning of fields, he said.
WoodMackenzie estimates 142 fields will cease productionover the next five years and that their decommissioning costswill reach 55 billion pounds.
"It is a vicious circle with the low oil price," Henry said.
M&A activity has not stopped completely and is focusingmostly on consolidating existing positions, Legate said.
The recent recovery in oil prices to around $50 a barrel wasnevertheless expected to revive M&A activity in the second halfof the year, she added.
BP last month doubled its interest in the Culzean gas fielddevelopment to 32 percent after buying a stake from JX Nippon.
Shell and Exxon Mobil last year sold a small clusterof fields, including the Anasuria Floating Production Storageand Offloading unit, to two Malaysian firms.
(Additional reporting by Freya Berry, editing by David Evans)
