Oil & Gas Authority in Talks with Conoco, Producers

UK offshore regulator the Oil & Gas Authority (OGA) is in talks with operator ConocoPhillips and companies that use its 30mn m³/d Theddlethorpe terminal regarding plans to decommission it, which would have repercussions for fields upstream.

It told NGE March 29 that it could not comment on whether the government might step in to provide support, possibly by acquiring the terminal and the associated offshore Lincolnshire Offshore Gas Gathering System, which is used by Ineos, Centrica and Faroe to land their production.

ConocoPhillips said it was working closely with the OGA, shippers and other stakeholders around the long-term plan for the terminal, but there are no immediate plans to decommission it. A number of the ConocoPhillips-operated gas fields which feed into the Theddlethorpe gas terminal have ceased production. ConocoPhillips has developed a phased decommissioning programme to responsibly decommission the offshore infrastructure in those fields over the coming years, its statement said.

Swiss-registered petrochemicals company Ineos bought the stake in the Clipper field, which relies on Theddlethorpe, from its operator Letter 1 last year. The Russian-owned company bought the assets of RWE-Dea, but was then forced by the UK government to sell in the interests of UK security of supply. The government was concerned that further economic sanctions on Moscow could hit UK security of supply.

The role of the OGA is to maximise the economic recovery of the UK continental shelf, while ConocoPhillips, a privately owned company, is not seeing that much use of the assets for its own gas production, the major fields such as Viking, for which it was built in the 1980s, now being largely depleted.

The OGA was set up a few years ago on the recommendation of Ian Wood, who was commissioned by the government to research ways to ensure as much oil and gas was produced as economically possible. Budgets since then have lowered tax rates for producers, but the low oil price makes more fields uneconomic.

He told The Times on March 26 that he hoped that private investors would step in and that there was no need for direct government intervention in asset ownership to avoid the domino effect of closing infrastructure downstream. "There may well be bits of central infrastructure that the government would have to find ways of financing," he said.

So far, two thirds of the UK's original 62bn barrels of oil equivalent have been produced, but it is now conceivable that only 10bn – half the remainder – will be produced, owing to low oil prices and resulting job-shedding.

William Powell