BP announced it has agreed to sell its Forties Pipeline System (FPS) business, with assets including the main Forties offshore and onshore pipelines and other associated pipeline interests and facilities, to INEOS.

Subject to partner, regulatory and other third party approvals, operatorship of the FPS assets and business will transfer on completion from BP to INEOS. The sale will not affect BP’s existing rights to capacity in FPS. Under the terms of the agreement INEOS will pay BP a consideration of up to $250 million for the business, comprising a cash payment of $125 million on completion and an earn-out arrangement over seven years that totals up to $125 million.

BP group chief executive Bob Dudley commented: “BP is returning to growth in the North Sea as we bring important new projects, including the Quad 204 redevelopment and Clair Ridge, into production and increase new exploration. While the Forties pipeline had great significance in BP’s history, our business here is now centred around our major offshore interests west of Shetland and in the Central North Sea.

“The pipeline has long been an important feedstock supplier to INEOS at Grangemouth. We believe that through also owning FPS, INEOS will be able to realise greater integration benefits and help secure a competitive long-term future for this important piece of UK oil and gas infrastructure.”

Built, owned and operated by BP, the Forties pipeline was opened in 1975 to transport oil from the Forties field, the UK’s first major offshore oil field. Today FPS carries liquids production from some 85 fields in the Central and Northern North Sea and several Norwegian fields on behalf of around 40 companies. The system has a capacity of 575,000 barrels of oil a day. BP sold its interests in the Forties field to Apache in 2003 and sold the Grangemouth refinery and chemical plants to INEOS in 2005.

INEOS chairman and chief executive officer Jim Ratcliffe commented: “The North Sea continues to present new opportunities for INEOS. The Forties Pipeline System is a UK strategic asset and was originally designed to work together to feed the Grangemouth refinery and petrochemical facilities. We have a strong track record of acquiring non-core assets improving their efficiency and reliability, securing long term employment and investment. I am delighted that we can now bring this integrated system back under single ownership in INEOS.”

Mark Thomas, BP North Sea Regional President said: “This allows us to further focus our North Sea business around our core offshore assets - bringing new fields into production, redeveloping and renewing existing producing facilities and acquiring and exploring new acreage and interests through licence rounds and farm-ins.

“As with our recent agreement with EnQuest, we believe this is a good example of having the ‘right assets’ in the ‘right hands’, offering new opportunities for the assets and benefitting the UKCS, in the spirit of the government’s aim of maximising economic recovery of the UK’s oil and gas resources.”

FPS is expected to transition to INEOS as a fully operational entity with those staff who operate and support the various elements of the business expected to transfer with the business. Their contractual terms and conditions are protected under UK Transfer of Undertakings (Protection of Employment) regulations (TUPE).

Around 300 BP staff are currently associated with operating and supporting the FPS business at Kinneil, Falkirk, Dalmeny, Aberdeen and offshore. BP will now begin consultation with in-scope staff for both the unionised and non-unionised populations.

Subject to the receipt of regulatory and other third party approvals, BP aims to complete the sale and transfer of operatorship during 2017.

Notes:

- The FPS system primarily comprises a 169 kilometre (105 mile), 36” pipeline from the unmanned offshore Forties Unity platform to the onshore terminal at Cruden Bay. From there a 36” onshore pipeline transports the oil 209 kilometres (130 miles) south to the Kinneil facilities, adjacent to the Grangemouth refinery and chemical plant, where it is processed and stabilised before output is sent either for export via the Dalmeny terminal and Hound Point loading jetty or on to Grangemouth.

- The deal includes the FPS business, including existing customer contracts, and assets including:
. FPS equipment on Apache’s Forties Charlie platform.
. Forties Unity platform.
. BP’s interest in the GAEL N (54.3%), and GAEL S (30.5%) pipelines.
. 36” Forties sea-line.
. Redundant 32” sea-line.
. St Fergus-to-Cruden Bay natural gas liquids line.
. Cruden Bay terminal.
. 36” Cruden Bay-to-Kinneil land-line.
. Netherley, Brechin and Balbeggie pumping stations.
. Kinneil terminal.
. LPG storage and export at Grangemouth and Grangemouth docks.
. Kinneil-to-Dalmeny pipelines.
. Dalmeny tank farm and pipelines to Hound Point.
. Hound Point jetties.

- The gross assets that are the subject of this transaction amounted to $816 million as at 31 December 2016. For the year ended 31 December 2016, a loss of $169 million arose in relation to these assets.
- As part of the agreement, INEOS will also assume all decommissioning liabilities.
- Proceeds from the sale will be used by BP for general corporate purposes.
- BP operates 11 fields which currently export around 55,000 barrels of oil a day through FPS.
- In 2016, the pipeline’s average daily throughput was 445,000 barrels of oil and some 3,500 tonnes of raw gas a day.
- BP expects the major Quad 204 redevelopment west of Shetland to begin production in the first half of this year. The new Clair Ridge project is expected to begin production next year.
- BP is also investing significantly in the reliability and integrity of its existing North Sea assets through an extensive renewal programme. It is nearing completion of a $1 billion investment in the ETAP cluster of fields which is expected to extend field life until at least 2035.
- Over the next 18 months, BP plans to participate in up to five exploration wells in the UK in addition to drilling approximately 50 development wells over the next 3-4 years.
- BP was awarded 12 licence blocks across the northern and central North Sea as part of last year’s 28th licensing round and has participated strongly in the 29th round.

About BP

BP (NYSE:BP) is one of the world's largest oil and gas companies, serving millions of customers every day in more than 80 countries, and employing nearly 85,000 people. BP's business segments are oil and gas exploration & production, and refining & marketing. In alternative energies, BP has low- and no-carbon wind and biofuels businesses. Through these activities, BP provides fuel for transportation; energy for heat and light; services for motorists; and petrochemicals products for plastics, textiles and food packaging. It has strong positions in many of the world's hydrocarbons basins and strong market positions in key economies.

About INEOS

INEOS will be the sole operator of the three licenses awarded today. Shale gas extraction has transformed communities in the USA where landowners own the mineral rights under their property. INEOS has developed an industry leading community benefits package that seeks to replicate this, giving communities a real stake in development. INEOS has promised to share 6% of revenues. Four percent of this would go to homeowners and landowners in the immediate vicinity of a well, and a further 2% to the wider community. Based on our estimates, a typical 10km by 10km development area would generate £375m for the community over its lifespan. Overall we anticipate that our future shale gas business could contribute over £2.5bn to communities under this scheme, having a material impact on regional economies and the standard of public services.

INEOS recognises that shale gas extraction is a controversial issue and communities have understandable questions about the potential risks and rewards. We will engage comprehensively and openly with communities at every stage to accurately convey the risks and rewards, so they can make an informed judgment about extraction. It is the view of mainstream scientific authorities such as the Royal Society and Royal Academy of Engineering that shale gas can be extracted safely with appropriate regulation, and there could be real benefits from doing so, including jobs, tax revenue, local investment and improved energy security. It is vital to have a thorough and evidence-based conversation to ensure this opportunity is considered properly.