Spain's Repsol is looking to the UK government for support with decommissioning and its tax treatment as it considers whether to add to a mature upstream business it has successfully turned around, upstream executive managing director Tomas Garcia Blanco has told S&P Global Platts.
Repsol bought into the North Sea when it acquired heavily indebted Canadian producer Talisman Energy in 2015 for $8.3 billion. The UK business, owned in a joint venture with China's Sinopec, includes the Flotta terminal in the OrkneyIslands and around 11 offshore installations, among them Claymore, which also handles crude from other fields such as CNOOC International's Golden Eagle.
Repsol Sinopec, in which the Spanish company has a 51% stake, has done little exploration drilling, and Claymore has suffered glitches this year. But Garcia Blanco said the venture had become much more efficient, cutting its operating costs from over $100/b to around $25/b on average.
Repsol Sinopec's output rose 10% last year to 59,000 b/d of oil equivalent, most of this being liquids. Garcia Blanco said the joint venture had a spending budget of $1 billion annually and saw opportunities to develop "small pools" of resources near its existing facilities if conditions were right.
"We had made such a turnaround in the last four years. When we took the assets the production efficiency was in the range of 35%. These days we're in almost the top quartile," he said on the sidelines of the Offshore Europe conference.
"We've been able to create huge value. We have experience handling mature assets, our DNA is very focused on dealing with brownfields, on dealing with difficult situations."
He said the North Sea could continue to generate value for Repsol, but new project activity would depend on the "evolution" of the decommissioning regime for mature assets.
"We see still opportunities to develop resources and generate value. You have to balance the efficiency of the production, but also the decommissioning, and the liabilities of decommissioning. And honestly it will depend a lot on the evolution of the tax regime," he said.
DECOMMISSIONING LOAD
A vital component will be "the evolution of decommissioning activity, decommissioning costs, the attitude of the government to give the industry a degree of freedom, to adapt to conditions," he said.
Industry group Oil & Gas UK has been pushing to reduce future decommissioning liabilities, partly through innovation in the removal of large offshore platforms, and in plugging and abandoning wells. This week it estimated the total cost of UK decommissioning had fallen from GBP60 billion ($74 billion) to GBP49 billion in the last two years, andsaid it was targeting a reduction to GBP39 billion by 2022.
The industry now argues that some infrastructure should be left in place as its removal could disrupt underwater habitats, rather than enhancing the environment.
