Will the Premier investment drive further North Sea investment

The bumper North Sea deals announced by Premier Oil yesterday will encourage hopes the shake up in the area triggered by the oil price fall will provide a long term boost to activity.

The expectation is that the process will result in assets being put in the hands of firms that may be more likely to invest in them than their current owners.

Majors such as BP have made clear they are only interested in investing in the kind of North Sea projects on which they can generate bumper profits.

However, some smaller players including Premier reckon they can make attractive returns from investing in developments that are too small for giants.

Premier is set to pay $625m for some assets that have been in BP’s portfolio for years.

It highlighted the potential to increase total production from these by investing in projects that can extend the lives of the fields concerned and in the development of finds nearby.

While some US majors have decided to exit the North Sea, BP is using some of the money raised from disposals to invest in favoured hubs in the area. These include Clair Ridge West of Shetland.

Premier’s decision to pay Dana Petroleum up to $246m for a 25 per cent in the Tolmount gas underlines the company’s confidence in the potential of a field it reckons could be in production for years.

It remains to be seen how much compensation any increase in activity arising from ownership changes will provide for the deep cuts made during the long downturn from which the industry is slowly recovering.

Source: The Herald