UK: North Sea Oil Sees Investment Rush
Hundreds of millions in decommissioning costs, field depletion, high taxes and low oil prices have been the highlights of media coverage of the UK’s North Sea oil industry. Yet the news is not all bad: the UK government approved a slew of tax incentives for field operators amid the oil price crash, and a few new discoveries have been made—not to mention, perhaps surprisingly, that quite a few billion dollars in M&A deals have flown into the region.
A recent report from Wood Mackenzie notes that the North Sea has in fact become the second-hottest spot for oil investments, after U.S. shale. That’s largely thanks to private equity’s renewed appetite for oil and gas investments: according to the consultancy, there’s a total of US$15 billion in PE capital waiting to be spent on North Sea acquisitions.
Already, several sizable deals have been made, including Chrysaor’s acquisition of US$3.8 billion worth of Shell North Sea assets, closed in January this year, and, most recently, French Total’s US$7.45-billion takeover of Danish Maersk Oil, most of whose assets reside in the North Sea.
In the first half of 2017, deals worth almost US$6 billion were sealed in the North Sea oil industry, the Oil & Gas Authority said in its Economic Report 2017, noting that these and future acquisitions serve as a sign of the industry’s gradual improvement and are a much-needed source of new investment that will ensure future production in the region.