Total to Sell their Stake in the North Sea

The French Oil conglomerate Total Global is looking to sell off its stake in the North Sea. They own part of one of the United Kingdom’s most promising natural gas fields. This could be the first in a flood of deals in the North Sea.

Total is looking to sell its stake, worth 20 percent in the deep water Laagan-Tomore gas field located 125 kilometers west of the Shetlands. It is considered a prime asset in their portfolio. This decision brings to the spotlight the ever rising costs in the industry and alleviate pressure in high-cost regions where the ever falling price in crude oil and gas are hitting profit levels. The plan sale will reduce its holding to 60 percent in the project.

Buyers for this higher class asset include Japan’s Nippon Oil, Austria’s OMV and the Kuwait Petroleum Corp. Total will continue to operate the field, due to come online later this year. They have already paid £3.5 billion to develop it. Its potential is more than 500 meters cubic per day (like 90,000 barrels of oil).

Should this deal happen, we will see further North Sea deals as developers are weighing falling profits. Brent Crude oil has fallen to $60 per barrel, down from $115 in the summer of 2014. As the price continues to accelerate downward, companies want out.

The deal is far from certain as this volatile market will push buyers and sellers far apart in valuations. Companies who want to buy will be very reluctant to put large sums of money aside to decommission older fields.

This combines field is mainly a natural gas producer. The price of this commodity is not directly linked to oil prices, but have fallen as well. This has come, in part, thanks to the US shale oil revolution. It is also a technically challenging project. Total has built a system, for production, that is 600 meters below the surface. The gas will be mined at the seabed and then taken to land in the world’s largest, if not longest, “tieback” network of pipes.