Conoco Announces Intention to Sell Clair Project Stake

Published at 09:53PM - 18/09/14

US energy giant ConocoPhillips has announced that it will be auctioning its ownership stake in Britain’s biggest oilfield. The news comes as the UK and Scottish governments are engaged in heated debate over the role and future of the UK North Sea as the referendum vote for Scottish independence approaches.

ConocoPhillips, based in Houston, Texas, has brought banks on board to dispose of its 24pc ownership stake of the Clair oil field, according to sources close to the deal. The confirmed value of this stake is yet to be revealed, but analysts believe that the sale could net between $2 and $3 billion US dollars.

The Clair project is located within Scotland’s territorial waters of the North Sea to the west of the Shetland Islands. The oilfield is one of the country’s most highly valued, and analysts believe that Conoco’s planned exit highlights the difficulties that are facing the oil and gas sector as it looks to profitably develop complex and marginal oilfields in an environment of ageing infrastructure, increased regulatory challenges and overseas competition.

The Clair oil field was found in 1977 and is estimated to hold up to seven billion barrels of oil. Production at the site began in 2005, and now a subsequent follow-on phase, Clair Ridge, is in progress, at an estimated cost of £4.5 billion. It is planned to begin producing in 2017.

Campaigners for a referendum ‘Yes’ vote believe that the Clair oil field could be sufficient to generate valuable tax and income revenues that could act as a support to Scotland’s public purse for several decades to come. However, more moderate industry analysts believe that the project will yet struggle with the technical challenges of oil extraction at the site.

The field’s operator is BP, with an ownership stake of just under 29pc, and it has commissioned a full appraisal project which will drill six wells and establish the site’s actual development potential in total. Four exploratory wells have been drilled, but the company is yet to communicate the results of the exploration publicly.

Clair’s other shareholders are Shell at 28pc and Chevron at 19pc. An anticipated issue for this forthcoming sale will be the potential gap in seller and buyer expectations regarding Britain’s future oil production potential. Both Westminster and oil experts have been quick to challenge Salmond’s claims about the future of Scottish oil and gas as being hugely optimistic and inflated.

‘Yes’ campaigners have referred to figures as high as 30 billion barrels of oil yet to be produced in Scottish territorial waters. Sir Ian Wood, however, the noted oil industry expert, has said that 15 to 16.5 billion barrels of oil is a more likely estimate.

By selling its ownership of Clair, Conoco will be supporting its wider operational strategy of focusing on North American shale gas and extracting itself from a number of overseas investments in order to finance US developments.

The company is one of Texas’s biggest producers in shale. Earlier this year, it increased its recoverable resources estimate in South Texas’s Eagle Ford to 2.5 billion barrels of gas and oil equivalent — a rise of 40pc on earlier estimates.