Scottish and Southern Energy (SSE) said yesterday it was making its first move into the upstream gas sector to secure future supplies.
It has entered into an agreement with Hess to acquire its natural gas assets and infrastructure in three regions of the southern North Sea: the Everest/Lomond area, Easington catchment area and Bacton area.
SSE will pay £278million in cash for Hess’s assets, which comprise stakes ranging from 5% to 25% in more than 30 gas fields.
It said there were no significant job implications, but it would probably recruit a few people to help to manage the assets.
The gas and liquid resources which SSE is acquiring total around 383billion cubic feet (bcf) or 64million barrels of oil equivalent (boe). The headline transaction price for these resources is $6.6 per boe.
The Perth-based utility said additional certain resources of gas might also be identified through further exploration.
SSE added that the operators of the bulk of the assets being acquired were BG Group, BP and Perenco.
It said it needed on average about 1.3bcf of gas per day to supply its customers and to fuel its power stations.
Gas from the acquired assets will provide around 8% of that initially, declining over the next 10 years.
While upstream gas assets represent the largest part of the transaction, SSE will also acquire other assets from Hess. These include a 17.7% equity interest in the Central Area Transmission System (Cats) pipeline, which delivers more than 10% of the UK’s total gas demand through a pipeline from the central North Sea to a processing terminal on Teesside. The Cats pipeline is operated by BP.
SSE chief executive Ian Marchant said: “This timely acquisition will enable SSE to enter the upstream gas sector in a measured way by buying proven and geographically diverse production assets.
“These assets will provide a new source of primary fuel and a hedge for our gas- generation and supply activities. The acquisition will also give us involvement throughout the gas chain.”
The deal echoes the much bigger £1.3billion acquisition last year by Scottish/British Gas owner Centrica of Aberdeen-based Venture Production, mainly for its upstream North Sea gas assets.
Centrica, already an experienced upstream operator in the North Sea with interests in more than 30 gas-producing fields, said at the time the Venture buy would reduce its exposure to volatile movements in wholesale gas prices and help to secure UK energy supplies.
Recommended for you
