By Kelly Gilblom (Bloomberg) — BP Plc has seen first oil from its giant Clair Ridge development in the North Sea, helping arrest decades of decline in a region where drillers have already produced most easy-to-reach resources.
The project increases output from the broader Clair field, which started producing oil in 2005. Clair is by far the biggest oil field in Europe, with more barrels than the second- and third-largest fields combined, but its geology and location beneath frigid, choppy Scottish seas have bedeviled potential drillers. To prepare for this phase, BP and its partners have worked for seven years and spent almost $6 billion.
The result is expected to be a cash-generating monster. Clair Ridge has about 640 million barrels of recoverable resources, 45 percent of which will go to BP and the rest to venture partners including Royal Dutch Shell Plc and Chevron Corp. The development is expected to play a major role in doubling BP’s output in the North Sea to around 200,000 barrels of oil equivalent a day by 2020.
This sort of development “does come with adversity — deeper water and more complexity relative to other rocks,” Ariel Flores, BP’s president for the North Sea region, said by phone. So “this is a very proud moment for everyone involved with this project.”
While Clair was discovered almost 40 years ago, it languished as companies focused on cheaper and less complex reservoirs in the southern part of the North Sea. BP submitted a development plan for the first phase of the field, about half the size of Clair Ridge, in 2001 and reached first oil four years later.
The company has long sought to expand that work, sanctioning the latest development in Clair in 2011, but a few years later was forced to slash its company-wide annual capital expenditure budget to about $16 billion from $25 billion during a worst-in-a-generation crude slump.
At the time, Clair Ridge was one of BP’s most complicated developments because the sandstone rock containing the oil has a web of natural fractures which makes production less predictable. It also required the building of two new offshore platforms, driving up costs. BP has relied on digital technology and automation, as well as shedding unnecessary engineering works, to slash expenditures by about half across the North Sea, Flores said.
“This basin was lagging in the past, relative to both costs and efficiency,” he said. “We’re trying to do more unmanned work to reduce the dependency of folks being out there.”
BP also hopes to later complete a third development of the Clair field, and is assessing the potential of other recent discoveries in the basin including Capercaillie and Achemelvich. The strategy contrasts with other oil majors in the North Sea, such as Chevron, which recently announced it’s divesting most of its older assets there as part of a broader portfolio review.
Flores said the British oil major did that three years ago and is happy with its assets in the basin now and isn’t planning a wide-scale portfolio review in the foreseeable future.
BP is the operator of Claire Ridge while Shell and Chevron also have stakes. The British company is also currently closing a deal to acquire most of ConocoPhillips’ 24 percent in Clair Ridge in exchange for assets in Alaska. That will bring BP’s share to 45.1 percent when the deal is completed before the end of the year.
© 2018 Bloomberg L.P