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Forties crude flows again, but safety concerns linger

Continuing investigations by UK authorities into the temporary closure of a key North Sea pipeline network could signal further safety worries

The reopening of the 450,000-barrels-a-day Forties Pipeline System (FPS) linking North Sea fields to the UK mainland after a shutdown for emergency repair has helped ease pressure on global oil markets. But questions over the robustness of the country's ageing oil and gas infrastructure will inevitably arise as a result of the stoppage.

FPS is one component of North Sea supply that sets the Brent oil benchmark—a fact that magnified the outage's impact and helped lift Brent above $65 a barrel on 11 December, a two-year high. Other forces have since pushed the price even higher.

But the reopening of the pipeline at the end of December is not the end of the story. The decision by the UK safety regulator, the Health and Safety Executive (HSE), to carry out further investigations into the shutdown does little to assuage concerns over future operations. On 4 January, the HSE described its investigation into the circumstances surrounding the incident as "on-going". The executive says its inspectors were satisfied with the operator Ineos's remedial work on a crack in the pipeline, but has not given specific reasons for extending the investigation—a measure which suggests it has further concerns.

Ineos bought the FPS from BP for $250m around six weeks before the shutdown. It said interaction between the pipeline and a rock on which it was resting at an onshore location south of Aberdeen may have caused the crack.

This may well turn out to be a one-off event for the FPS, which has suffered few such problems in the past, but fears of a repeat will be a worry for the numerous companies using the pipeline network and whose production was halted. These include major players, such as Apache, BP, Shell and Total. It's a bigger concern, though, for the growing group of smaller companies that have taken operatorship of more marginal North Sea assets from the majors. They are less able to soak up losses from any protracted shutdowns in the future.

Chrysaor, which operates assets once held by Shell, and Serica Energy, which recently did a deal to buy BP assets, both lost oil revenues as a result of the shutdown. Serica, which has an 18% stake in the Chevron-operated Erskine field, revised guidance for its net share of production from Erskine over 2017 down to 2,000 barrels of oil equivalent a day from 2,200-2,400 boe/d because of the shut in.

Premier lifts gloom

Despite the uncertainty, the maturing UK section of the North Sea has attracted more investment in recent years than seemed likely following the oil-price fall. Greater efficiency, lower costs and technological developments, combined with the modest price recovery, are helping to extend the life of several fields and spawn some new developments.

The latest is Premier Oil's $1.6bn Catcher project, located some 180km off Aberdeen, which began production on 23 December. Premier, whose output from some of its existing fields was hit by the FPS shutdown, said Catcher's initial production of 10,000 b/d is expected to rise to 60,000 b/d during the first half of 2018. The start-up for Catcher, which Premier said came in on time and about 30% under budget, is a welcome success for the company. Its Solan project off Shetland was hamstrung by various budgetary, technical and logistical problems, which delayed start up by more than a year.

The Catcher project will also be free from pipeline problems, as its output will be pumped straight onto tankers from BW Offshore's BW Catcher floating production, storage and offloading vessel.

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