The boss of Canadian oil explorer Talisman has said the firm would look to expand its relationship with new partner Sinopec – both in the UK North Sea and beyond.
Group chief executive Hal Kvisle told the Press and Journal that, while no further deals had been discussed with the Chinese firm, anything could be possible down the road.
He was speaking on a visit to Talisman’s UK business unit in Aberdeen, soon to be 49% owned by Sinopec as part of a new stand-alone joint venture following a £956million deal announced earlier this year.
“We would like to expand that (the partnership) if there are other opportunities in the UK North Sea,” said Mr Kvisle.
“Maybe exploratory drilling, maybe increasing interest in existing operations, maybe adding international operations. Whatever we do in the North Sea we will be doing it together.”
Mr Kvisle, who took over as chief executive of Talisman in September, said there was no current plan or concept that they would see Sinopec acquiring additional assets from Talisman, which has been in the North Sea since 1994.
Talisman has stakes in 46 North Sea fields, and operates 11 platforms plus the Flotta oil terminal in Orkney,
“There are no other assets we’re preparing to put into this or capital programmes we are looking to take them into,” said Mr Kvisle.
“Having said that, once we have build a good working relationship – no matter who the partner is – we look to do more with them,” he added, saying that this was something Talisman had already done in the past with other partners.
“Anything is possible down the road,” he added. “We could think about south-east Asia, south America or the North Sea.
“It could involve acquiring assets from other companies or doing exploratory work, that could be anywhere.
“At this time we have done no such deals, we’ve not even talked about that.”
Mr Kvisle said bringing Sinopec on board came at a time when capital was constrained and operational costs were rising for all firms.
Talisman itself was also going through changes after the previous chief executive John Manzoni stepped down in September.
“The company had been investing at a significant rate in expectation we could grow production significantly,” explained Mr Kvisle, who was on Talisman’s board for two and a half years before taking over.
“We have added production, but only really to offset natural declines.
“We felt it was time to pull in our horns a bit, not so much wildcat international exploration and pay a little more attention to our core assets.”
Mr Kvisle said Talisman has had a “very big aggressive” programme building a shale gas business in North America.
He added: “That has consumed a lot of capital and management attention. In those periods other assets (like the North Sea) are just taken care of.
“We want to change that. It is important we re-establish the North Sea. We’ve always had a positive view of it – it is one of a few places in the world where there is a lot of oil still in place. Through good reservoir management, we could recover a lot more.”
He said investment in the North Sea, where Talisman employs about 2,800 people directly and indirectly, would be “about 150% of what we’ve been investing in the last two years”.
Earlier this month, Oil & Gas UK’s Pilot Share Fair was told the firm had planned to spend about £1.8billion over the next three to five years, but that thanks to the deal with Sinopec that would increase the figure to about £3.1billion.
“We’re concerned about the longevity of our assets in the North Sea,” said Mr Kvisle. “Extending their lives is what this deal is all about.”
“The reason we did the Sinopec deal, in this capital constrained world everyone is cutting back on capital spending. Partly due to commodity prices being a little weaker. Capital costs have got very high. There’s been a lot of inflation in the upstream sector in the North Sea and onshore in North America.
“We can’t afford as an industry to operate at the level we had been.
“Part of our options, with a great depth of knowledge in the North Sea, was to bring in a partner. With Sinopec coming in we will be investing significantly more than Talisman was before.”
While the future is looking more positive for the firm’s UK business, it’s Norwegian operation has been dogged by issues on the Yme platform.
Workers had to be evacuated from the structure during summer due to concerns over its substructure.
First production is now likely to have been delayed by about five years, he said.
“I don’t think Yme should damage our reputation,” said Mr Kvisle. “There were some mistakes made in the past on execution of the project.
“Our contractor has had some difficulties delivering, but Talisman is doing everything it can with the Norwegian authorities to make sure it is safe and secure.
“I think by the end it comes online we will probably have been delayed by more than five years from the original expected date.”
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