On September 1, Taqa Bratani assumed operatorship of the UK’s Brent pipeline system in the East Shetland Basin. The news appeared to come from out of the blue even though it was apparently never a secret that Shell had resigned as network operator in July 2008.
This is a totally different situation to BP’s deal with Apache over Forties which, in 2003, saw the field sold to the Houston-headquartered independent, but the super-major retained the associated pipeline system as a valuable cash cow.
However, divestment of the Brent field itself was never a part of the discussion between Taqa and Shell.
Just a few years ago, Brent was a Shell-dominated system, including ownership of much of the producing infrastructure.
However, Taqa now controls Cormorant Alpha, North Cormorant, Tern, Eider and Pelican, which is subsea. Lundin has possession of the originally BP-operated Thistle asset, while CNR now operates Murchison (formerly operated by Kerr-McGee.
That leaves Dunlin and the Brents under Shell/Esso control, while Alwyn, which feeds into the 147km (92-mile) Brent system, remains firmly with Total.
For Leo Koot, Taqa Bratani’s MD, taking over operatorship of the Brent system was a logical next step, especially given that the company already controlled the key to the pipeline’s management – the Cormorant assets.
“When the package came on the market, including Brent system, initially, there has been a debate on whether we should take over Brent system, bearing in mind that the majority of the system is operated from Cormorant Alpha, which is ours,” he told Energy.
“We made the strategic decision that it would be a very important play for us. It is the key infrastructure to Northern North Sea assets and everything around those.
“Brent (completed in 1975) is a key piece of infrastructure that will cement our position in the Northern North Sea.
“Now we can set about optimisation, as some infrastructure is redundant or is not used to 100% of capacity. There are various options. For example, will we be producing Ninian oil&gas through the Brent system or is the Brent pipeline system going to be going through Ninian, or are there new developments out there that could fill both systems again?
“There’s a whole play out there. We want to be part of the discussion because we have vested asset interests and we want to make sure that we always have good access to good infrastructure to bring our oil to shore.”
As far as Koot is concerned, whichever way this cake is cut, there will be gains.
“We control the pipeline infrastructure, so that puts us in a very strong position. That, together with our position in Sullom Voe terminal, offers potential for expanding the business.”
In the case of Sullom Voe, Koot finds it hard to imagine that Taqa won’t come out on top, not with the West of Shetland opportunities now opening up.
“If you look at the oil&gas discoveries both east and west of Shetland, it is a strategic hub and it’s going to be there for the long term. We want to be part of it, to be engaged in the discussions, invest where possible. It fits our strategy of becoming a long-term player in the North Sea.”
As for the Brent field itself, Koot said: “The option to take over Brent has never been on the table. It was the Brent system that was put up for offer, not the Brent field itself.
“I think Shell made the strategic decision that Brent is such a trade name … their reputation is all over this … that they want to see these fields through to the end.”
But surely the pipeline system has its name over it, too? Yes and no. Koot pointed out that, because Shell had already sold Cormorant to Taqa, and therefore the key to the door, so to speak, the conclusion was foregone.
“It would have been very difficult for Shell to continue controlling the Brent system. They thought it through; operationally, this was the only option.”
Koot told Energy frankly that he had underestimated the importance of the Brent hand-over as a piece of news in August.
“Shell resigned in 2008; it was never a secret. I’m surprised that nobody knew. It has never been a secret.
“This (announcement) was a tick in the box. All our decisions were made between July and December last year. That’s when we did all the hard work – the grind – the ‘Do we really want to take this on?’ bit.”
An important aspect of this latest move by Taqa is that the company is bent on taking direct responsibility as duty-holder, as it has with its other UK Continental Shelf acquisitions.
The last company to become a UKCS duty-holder, per se, appears to be CNR – more than a decade ago. Otherwise, operators have increasingly divested this responsibility to main contractors willing to shoulder duty-holdership.
Koot said there was no way that Taqa wanted to use a contractor as a shield. In any case, there was no point as, under the latest corporate manslaughter legislation, it was clear where the buck would ultimately land – on the desk of the operator’s MD or CEO.
“For us, the significance of duty-holdership has got much bigger; we’re dealing directly with the HSE (Health & Safety Executive) now. For us, that really puts Taqa on the map as a prudent UK operator.
“In the long run, if a catastrophe happens offshore, it’s going to end up with the operator anyway. Contractor duty-holdership with the operator behind is an artificial shield.
“You may as well bite the bullet and take on the liabilities yourself and get your organisation to a place where it is competent … then you are in complete control.
“From a global perspective, it’s important, too, as Taqa is continuing to build its base of knowledge and expertise in Aberdeen, and that’s something we can start exporting around our global upstream business.”
Koot agreed that Taqa, which is an Abu Dhabi company, had come a long way during its short tenure in the North Sea. That started in 2007 with the acquisition of various Brae sector assets.
However, he paid tribute to the contractors involved with the various assets involved.
“We couldn’t have done it without companies like Wood Group and Senergy. They have been extremely helpful and good partners.”
Clearly, one reason why Taqa has come such a long way in such a short time is that money talks. This company is very well funded, unlike most new-generation independents, many of which are currently fighting for survival.
“It’s not the fact that you’re throwing money around; it’s the fact that you have instant credibility the moment you enter the room because people by now know what Taqa is about and that we’re backed by the Abu Dhabi sovereign wealth fund,” said Koot.
“So they know you’re a credible player. Moreover, you’re not here in the North Sea trying to make a quick buck, like many of the smaller companies are. You’re here for the long run.
“This is about ‘patient money’, as Peter Barker-Homek (group CEO) says. I think it’s something that others have to relearn,” said Koot, who is heritage Shell and has a private-equity background, too.
“It is welcome, indeed, that we are able to take a longer-term view on how to build a business, rather than the short-term, one-well, hit-or-miss approach where, if it’s a hit then you’re a millionaire; if it’s a miss … well.
“I think it’s good for the UK to have companies like Taqa. Short-termism is the death of infrastructure and proper business sense. We take a long-term view and all of this year we’ve been investing counter-cycle. Hopefully, by the time oil prices settle, we’re going to be sitting pretty with a nice portfolio of production. It’s not difficult. It’s stamina.”