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Total sells UK midstream assets

After the sudden drop in oil prices last year, Total is cutting costs to raise funds

After the completion of the sale, Total will pay the new owner to transport its offshore production.

Like its peers, Total is cutting costs, selling off what assets it can and generally retrenching in an effort to weather last year’s sudden drop in the oil price. This year it aims to raise $5bn from disposals.

The Frigg gas field has been decommissioned but the 362-km, 32-in pipeline continues to deliver gas from over 20 fields to St Fergus, where Total’s three-train terminal has the capacity to process 2.648bn cf/day. SIRGE is a 234-km long, 30-in pipeline that will be able to deliver 656m cf/d from the Laggan-Tormore project which is due to start up soon. SIRGE runs from the Shetland gas plant to the FUKA line. Total has retained a stake in the Shetland plant, after selling a 20% stake to Scottish & Southern Energy in July.

North Sea Midstream Partners was set up in 2012 by US-based equity firm ArcLight Capital Partners, former upstream entrepreneur Mike Wagstaff – who was the chief executive of Venture Production – and the senior management of Teesside Gas Processing Plant (TGPP). The plant takes wet gas from the Breagh field and the Central Area Transmission System (CATS) and strips out the liquids for use in the local industry. The dry gas is delivered to the onshore grid. The assets will be operated and maintained under an agreement with Px Group, which also manages TGPP.

Total told Petroleum Economist that the sale includes the existing tariff agreements for third-party gas transported through the system. A spokesman said: “These tariffs were established through negotiation. Going forward TEPUK has entered into new tariff agreements with the new owner in respect of its equity gas which previously only paid its throughput share of operating costs. These new tariffs have been negotiated with the new owner on a commercial basis and are in line with market tariffs.”

Total said that it, and its partners, were still working to complete the Laggan-Tormore project but, it told PE, “during recent discussion around the sale of 20% of Laggan assets [to Scottish & Southern Energy at end-July] we concluded that the SGP was an integral part of Greater Laggan Area. We consider it to be the production platform, but onshore. Therefore the deal regarding the sale of SIRGE definitely set the perimeter to exclude sale of the SGP.”

The CATS line was the first major piece of UK offshore infrastructure to be taken over by a third party – in that case it was France’s Antin Infrastructure who bought out the former owners BG and BP who committed to send a certain volume of gas through it annually on ship-or-pay terms.

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