Oil firms may retain clear-up costs for hard-to-sell N. Sea assets

* M&A in ageing North Sea stagnant after oil price drop

* Removing decommissioning costs could spark deal making

* N. Sea decommissioning costs to reach $78 bln -report

By Ron Bousso and Karolin Schaps

LONDON, July 21 (Reuters) - Oil firms trying to sell ageingNorth Sea oilfields are considering shouldering hundreds ofmillions of dollars in future dismantling costs to help findbuyers, industry sources say.

One of the world's oldest and most important offshore oiland gas production basins, the UK North Sea faces dwindlingoutput and a growing number of redundant platforms that requiredecommissioning in a scale and complexity never seen before.

The near halving of oil prices over the past year to below$60 a barrel has forced the industry to slash spending, increaseefficiencies and sell or shut down assets that are leastprofitable or which do not fit their portfolios. [ID;nL8N0ZQ2M8]

But despite a large rise in the number of assets up for salein the North Sea in recent months, only a few deals have beencompleted.

"There remains a very big gap between buyers and sellers andthat hasn't been narrowing the way some expected," saidChristopher Young, director of the Strategy Group at KPMG.

Decommissioning, which involves plugging wells with cementon the seabed and removing obsolete platforms and pipelines, hasproved to be a major stumbling block for deals.

As companies come to grips with an extended period of lowoil prices, the urgency to sell assets is growing. As a result,boards are weighing up new strategies.

"A lot of companies under stress are now starting toconsider if retaining some or all of the decommissioningliability might be an option for selling," Young told Reuters.

"Our conversations with a number of North Sea operatorssuggest that others are now considering selling assets whileretaining decommissioning liabilities."

BP and Total are among several fieldoperators considering such a strategy, according to the sources.

"On the big old fields, which is what the majors areselling, decommissioning is a major issue. They have been tryingto sell some of those fields for quite some time. It'sunattractive to take on those decommissioning liabilities," TonyDurrant, Chief executive of Premier Oil told Reuters.

"The others, including BP, are coming around to the viewthat the only way they can reduce their assets in the UK is byretaining those liabilities."

Decommissioning costs can reach hundreds of millions ofdollars for the larger North Sea assets.

Total decommissioning costs in the UK continental shelf overthe next 30 years are expected to reach around 50 billion pounds($78 billion), according to a strategic industry review by sirIan Wood for the British government.

BP, which has been selling assets in the North Sea since1996, said it is considering all options.

"Our preference is to sell assets with the decommissioningliability, however the agreements reached with buyers are dealspecific," a spokesman said.

Total was not immediately available for comment.

DE-RISKING

The concept of shouldering the decommissioning costs wasused at least once when BP sold to DNO in 2003 theThistle field, today operated by Enquest.

The oil price drop also offers opportunity for buyers,particularly private equity funds such as Caryle Group,and Riverstone to invest in the North Sea.

Removing the decommissioning costs would make late-lifeassets more attractive and remove a lot of risk buyers mightassociate with them.

"The number of potential buyers for such assets will be farhigher than is the case in a traditional sale," a KPMG reportsaid.

At the same time, seller will receive a higher price for theasset which would boost balance sheets in the short-term.

But the risks for sellers are significant as they will haveto earmark large sums of money for the future decommissioning.Legal pitfalls may also arise, KPMG said. (Reporting by Ron Bousso, editing by David Evans)