Energy firm SSE has clinched a deal to sell its UK continental shelf (UKCS) gas exploration and production assets to Viaro Energy for £120 million.
Viaro, meanwhile, is selling its stakes in the Greater Brae Area (GBA) to a company owned by the emirate of Fujairah in the United Arab Emirates for $1 (75p).
SSE’s package includes non-operated stakes in 15 producing fields in three areas of the North Sea, including 20% of Total’s Greater Laggan Area (GLA), west of Shetland, and interests in the Easington and Bacton catchment areas.
Perth-based SSE said its ownership of the assets was “ultimately not aligned” with its strategic focus on reaching net-zero emissions.
It intends to invest £7.5 billion in low-carbon energy infrastructure over the next five years.
SSE revealed in May 2019 it was taking “active steps” to sell the UKCS gas portfolio.
Finance director Gregor Alexander said yesterday: “We have said for some time that gas exploration and production assets are inconsistent with our future ambitions and vision to be a leading energy company in a net-zero world.
“This sale clearly comes at a difficult time for the exploration and production sector, and the economy as a whole, but we believe it is the right move for our shareholders as we focus our resources on our core low-carbon businesses.”
The SSE assets are expected to produce more than 15,000 barrels of oil equivalent (boe) per day in 2021, increasing Viaro’s production to in excess of 30,000 boe upon completion, slated for mid-2021.
London-headquartered Viaro Energy is part of commodities trader Viaro Group, owner by businessman Francesco Mazzagatti.
He said: “This is very exciting next step for Viaro, as we build towards our target of producing 100,000 boe per day.”
The transaction between Viaro and SSE is made up of £25m in cash, payable at completion, with the remainder forming a loan repayable over three years.
An additional £40m is payable depending on forward gas prices, as is “up to £560,000 per billion cubic feet of gas” if the Glendronach discovery, in the GLA, successfully produces.
SSE will pay 60% of the decommissioning costs.
In September 2018 Glendronach was announced as the UKCS’s biggest conventional discovery since Culzean 10 years earlier, boasting recoverable resources of one trillion cubic feet of gas, or around 170m boe.
Total subsequently cut its estimate for the field by 40% and put off a decision on sanctioning the development until 2021.
If the project goes ahead, Glendronach would use the GLA productions system, which includes a 90-mile pipeline to Shetland Gas Plant.
Production from GLA kicked off in 2016 with the Laggan and Tormore fields, which were followed by Edradour and Glenlivet.
Viaro is executing the acquisition through its subsidiary RockRose Energy, which it acquired earlier this year for £250m.
RockRose had been headed up by oil and gas entrepreneur Andrew Austin and was listed on the London Stock Exchange.
Following its launch in 2015, RockRose bought interests in North Sea fields from the likes of Dyas, Sojitz and Idemitsu before pulling off a major swoop for US firm Marathon Oil’s UK business in 2019.
RockRose agreed pay £107 million for Marathon’s North Sea assets, which included 37-40% of the GBA, 140 miles north-east of Aberdeen, and take on the decommissioning liabilities.
RockRose was also to receive the seller’s “working capital and cash equivalent balances”, which stood at £267m at the end of 2018.
Operatorship of the GBA was subsequently transferred to Abu-Dhabi firm Taqa after licence partners raised “serious concerns” in court about RockRose’s ability to run the assets.
Mr Mazzagatti said the sale of its stakes in the GBA and associated Sage pipeline infrastructure to Fujairah International Oil and Gas Company would materially strengthen its balance sheet and significantly lowered its exposure to decommissioning costs.
That deal should be completed early next year.