Ineos buys Letter One North Sea assets
The acquisition of Dea's UK North Sea assets is Ineos' first foray into upstream production. The firm has sought to build a position in the UK's fledgling shale gas sector in the past 18 months as part of a long-term strategy to secure feedstock for its chemicals plants, including the Grangemouth complex in Scotland.
"Ineos and its joint-venture partners are huge consumers of natural gas, ethane, propane and condensates. North Sea oil and gas can make a significant contribution to providing these feedstocks, as well as servicing our energy needs," Ineos upstream chairman Rob Nevin said.
Ineos has hinted that it may consider further North Sea acquisitions. "Ineos has been very open about its intention to make strategic investments in the North Sea and this acquisition is our first step in fulfilling this goal. It will also help our UK petrochemical assets to have ongoing access to competitive energy," Ineos chief executive Jim Radcliffe said.
The deal will net Ineos a stake in 12 producing natural gas fields, including Breagh and South Clipper. Breagh output averaged 3mn m?/d in January-June — the latest month for which data are available — while South Clipper production was 2.25mn m?/d. Gas demand at Ineos' Grangemouth chemicals plant averaged 1.4mn m?/d in the year to October 2015.
Russian firm Letter One acquired Dea from Germany's RWE for around €5bn ($5.7bn) in March this year. But it was ordered by the UK government to sell Dea's UK fields amid concerns that they might have to stop producing if Letter One were placed under sanctions over Russia's annexation of Crimea.
Letter One, which was established in 2013 by Russia's Alfa Group, a former shareholder of TNK-BP, is likely to use the proceeds for upstream acquisitions, with Eon's North Sea assets a potential target.