UK oil giant BP has agreed to sell its Forties Pipeline System (FPS) business, with assets including the main Forties offshore and onshore pipelines and other associated pipeline interests and facilities, to chemicals company Ineos.
Following talks in March to sell the pipeline, BP said on Monday that, subject to partner, regulatory and other third party approvals, operatorship of the FPS assets and business will transfer on completion from BP to Ineos.
Ineos noted that, at this point, it will be responsible for a UK asset that delivers almost 40% of the UK’s North Sea oil and gas.
The sale will not affect BP’s existing rights to capacity in FPS. Under the terms of the agreement Ineos will pay BP a consideration of up to $250 million for the business, comprising a cash payment of $125 million on completion and an earn-out arrangement over seven years that totals up to $125 million.
BP group chief executive Bob Dudley commented: “BP is returning to growth in the North Sea as we bring important new projects, including the Quad 204 redevelopment and Clair Ridge, into production and increase new exploration. While the Forties pipeline had great significance in BP’s history, our business here is now centered around our major offshore interests west of Shetland and in the Central North Sea.
“The pipeline has long been an important feedstock supplier to Ineos at Grangemouth. We believe that through also owning FPS, Ineos will be able to realize greater integration benefits and help secure a competitive long-term future for this important piece of UK oil and gas infrastructure.”
Built, owned and operated by BP, the Forties pipeline was opened in 1975 to transport oil from the Forties field, the UK’s first major offshore oil field. Today, FPS carries liquids production from some 85 fields in the Central and Northern North Sea and several Norwegian fields on behalf of around 40 companies. The system has a capacity of 575,000 barrels of oil a day. BP sold its interests in the Forties field to Apache in 2003 and sold the Grangemouth refinery and chemical plants to Ineos in 2005.
Ineos chairman and chief executive officer Jim Ratcliffe commented: “The North Sea continues to present new opportunities for Ineos. The Forties Pipeline System is a UK strategic asset and was originally designed to work together to feed the Grangemouth refinery and petrochemical facilities. We have a strong track record of acquiring non-core assets improving their efficiency and reliability, securing long term employment and investment. I am delighted that we can now bring this integrated system back under single ownership in Ineos.”
Mark Thomas, BP North Sea Regional President said: “This allows us to further focus our North Sea business around our core offshore assets – bringing new fields into production, redeveloping and renewing existing producing facilities and acquiring and exploring new acreage and interests through licence rounds and farm-ins.
“As with our recent agreement with EnQuest, we believe this is a good example of having the ‘right assets’ in the ‘right hands’, offering new opportunities for the assets and benefiting the UKCS, in the spirit of the government’s aim of maximizing economic recovery of the UK’s oil and gas resources.”
According to BP, FPS is expected to transition to Ineos as a fully operational entity with those staff who operate and support the various elements of the business expected to transfer with the business. Their contractual terms and conditions are protected under UK Transfer of Undertakings (Protection of Employment) regulations (TUPE).
Around 300 BP staff are currently associated with operating and supporting the FPS business at Kinneil, Falkirk, Dalmeny, Aberdeen and offshore. BP will now begin consultation with in-scope staff for both the unionized and non-unionized populations.
To remind, UK’s trade union Unite in March responded to the talks of Forties sale with demands for urgent government inquiry into the ownership of “critical industrial resources.”
Subject to the receipt of regulatory and other third party approvals, BP said it aims to complete the sale and transfer of operatorship during 2017.
The agreement further expands the Ineos Upstream business following the acquisition of the Breagh and Clipper South gas fields in the Southern North Sea from Letter1 in 2015, which currently supply gas to 1 in 10 British homes.
The acquiring entity will be Ineos FPS Limited, which forms part of Ineos Limited but is not part of the IGH SA Group.