ABERDEEN, UK – The North Sea is set for further infrastructure transactions this year, according to business advisory firm Deloitte, as more oil and gas companies seek to divest non-core assets on the UK continental shelf (UKCS).
Private equity and specialist infrastructure funds are the likely purchasers.
Deloitte’s latest European Infrastructure Investors survey found that pipelines, in particular, have provided steady economic returns over the past five years, with an internal rate of return of 14% during 2013-2016. These should remain a strong focus for infrastructure investors in the future.
Shaun Reynolds, director, Transaction Services, at Deloitte, said: “Historically, big oil and gas operators developed and owned what they needed, transporting their major discoveries through proprietary pipelines and refining it in their own processing plants. That’s largely remained the case, until the last two or three years.
“The ownership model has evolved, driven by the maturity of the basin and the low oil price. Established players are divesting to shore up their balance sheets, and infrastructure is comparatively less complex to value and sell, with a ready market at the right price.
“Private equity firms and specialist energy infrastructure funds are likely buyers – specifically those with a solid grasp of the UKCS. They’ll look to take a number of assets under management, create a portfolio, maximize their potential and then look to divest; most likely to a pension fund aiming for steady returns from a stable asset.”
Last year BP sold its stake in the Central Area Transmission System (CATS) in the UK central North Sea to Antin Infrastructure Partners for £324 million ($469 million). Earlier, Antin had bought BG’s stake the previous year, giving it near-complete ownership of system.
Changes in stewardship of UK North Sea infrastructure could be a positive development for the industry, Reynolds added, with 20 Bboe thought to be still recoverable across the basin.
“Private equity will provide focussed management of the assets and ensure they are being used to their utmost potential. That can only be a good thing, particularly from a longevity perspective…
“As the oil price continues to take its toll and pressure mounts on balance sheets, more operators will have to look at rationalization and infrastructure tends to be a logical sale. Deals are brewing in the UKCS – and we’ll see more on the infrastructure front in the short to medium term.”
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