BP and Serica Energy have said they expect to complete a landmark deal involving a group of North Sea fields in spite of the transaction getting caught in diplomatic crossfire between the US and Iran.
Serica has agreed to buy stakes in three fields from BP for up to £52m in a move the company expects will make it a major player in the North Sea.
Read more: Oil and gas independents are showing ambition off Scotland
However, BP said yesterday it had deferred upgrade work on one of the fields amid the fall-out from President Trump’s decision to take the US out of the nuclear deal with Iran.
The gas field concerned, Rhum, lies East of Shetland and is 50 per cent owned by the Iranian Oil Company.
Separately BP announced that it plans to cut its exploration and production workforce numbers by around three per cent globally to maximise efficiency.
The company said around 540 jobs could go out of a global total of 18,000 without indicating where the cuts would be made.
BP shed around 600 jobs in the North Sea and sold non-core assets in response to the challenges posed by the sharp fall in the oil price between 2014 and 2016. It employs around 1,500 in the UK North Sea.
Read more: BP to axe 600 North Sea jobs
Led by executive chairman Tony Craven Walker, Serica said operations on Rhum would be affected by the sanctions regime the US has announced will apply to Iran.
US Secretary of State Mike Pompeo said on Monday that America would impose the strongest sanctions in history on Iran.
BP said it had decided to defer some planned work on a production well on Rhum while seeking clarity on the potential impact on the field of recent US government decisions regarding Iran.
The oil giant noted: “Rhum is co-owned by an Iranian company. BP always complies with applicable sanctions.”
While Rhum remains in production for now, BP’s operations on the field are covered by a licence from the US authorities which expires on 30 September.
However, both Serica and BP remain committed to completing the transaction they agreed in November. This is expected to pave the way to a big increase in investment in the three fields concerned, Bruce, Keith and Rhum.
Independents such as London-based Serica expect to achieve good returns on projects that could be too small to interest the majors.
Read more: London oil firm eyes more North Sea acquisitions
The BKR transaction could become the subject of diplomatic manoeuvring.
BP said the two companies are in discussion with the UK and US authorities to better understand the situation and steps that may be required to ensure continued operation of Rhum.
Serica’s chief executive Mitch Flegg said the company and partners were receiving the full support of all the relevant UK authorities in their efforts to identify suitable measures that would be acceptable to the US authorities. These would be intended to protect safe and efficient Rhum operations and ensure maximum economic recovery of reserves from a valuable UK resource.
He insisted: “All aspects of completing the BKR transaction remain on track.”
Serica and BP appear to hope a compromise will be reached which will result in the US authorities granting a fresh licence covering operations on Rhum or extending the existing one.
Production from the field was impacted by sanctions imposed on Iran by the EU, in force from 2010 to 2016.
BP obtained a licence from the US sanctions enforcement agency, the Office of Foreign Asset Control, to operate Rhum in September 2016.
Serica said meetings are scheduled with OFAC in the next few weeks. But it noted US policy in respect of the granting of OFAC licences is expected to change.
The company has invested time and effort in negotiating the BKR deal and planning for the step change in operations which would follow its completion.
Serica gets all its production from the Erksine field in the North Sea currently. It plans to open a new Aberdeen operations centre. Around 110 BP employees are expected to transfer to Serica.
Mr Flegg said an Aberdeen office has been identified and the transition process of moving staff and contracts from BP to Serica is well advanced. Serica shares closed down 1.8p at 68.6p.
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