BP signs deal to extend UK West of Shetland Foinaven production

BP has signed a deal with a service provider intended to ensure the long-term future of Foinaven, its longest-producing oil field in the UK West of Shetland area, it said Friday, signalling an end to a period of uncertainty over the field's production facility.

The deal with Altera, provider of the Petrojarl Floating Production Storage and Offloading vessel, to extend the vessel's use for another decade appears to reinforce BP's presence in the West of Shetland area, where it has recently overhauled the two largest producing fields, Clair and Schiehallion.

Altera was known as Teekay until a rebranding this month.

In production since 1997, Foinaven was the first of the deepwater West of Shetland fields to come on stream, with production peaking at 113,000 b/d in 2002, before falling back to under 20,000 b/d recently.

The West of Shetland region is viewed as the main hope for prolonging UK oil production, but also a high-cost location with major technical challenges.

BP was looking to cut its West of Shetland costs even before the oil price crash induced by COVID-19.

Foinaven was shut for a longer-than-expected period of maintenance last year, and BP was considering replacing the Petrojarl vessel with a new, possibly more energy-efficient facility as it pondered the field's future.

However, according to Friday's announcement, Altera and BP have agreed a 'bareboat' charter lasting around 10 years that entails an up-front payment of $67 million followed by a "nominal" day rate and a lump sum at the end for recycling the vessel.

Altera will also provide operating services and the shuttle tanker service needed to ship the crude to market, it said.

The agreement represents "an innovative contractual framework for the FPSO's operating services and shuttle tanker provision, giving BP greater influence over the strategic direction of operations while allowing us to build on our existing strong relationship with Altera Infrastructure," BP regional president Ariel Flores said in a statement.

"It will also help ensure safe, reliable and efficient operations out to at least 2025 and give us space to set the Foinaven area up for future success."

Foinaven prospectivity

Speaking in September to S&P Global Platts, Flores had noted the field's propensity for lengthy shutdowns, but also its continued prospectivity, saying "the reserves are absolutely there".

That view was echoed Friday by Andrew Austin, CEO of RockRose Energy, BP's partner at the field with a 28% stake obtained when it bought US company Marathon's Oil's UK assets last year.

"Foinaven is a functioning, producing area. It is not the cheapest barrel we produce in our portfolio, but it is probably more understood and there are probably more barrels under the sea there ready to be recovered than there are in a lot of our other areas," Austin told Platts.

"We see the whole Foinaven area as a very interesting place to operate in and we do have a functioning hydrocarbon and export system at the moment in the shape of the vessel that is on that site."

Source: SP Global