The Times: BP puts its stake in Ormen Lange up for sale: “BP IS selling its interest in Ormen Lange, the giant Norwegian gasfield that achieved notoriety this year over the proven gas reserves booked by investors in the project. (ShellNews.net)
By Carl Mortished, International Business Editor
October 20, 2004
BP IS selling its interest in Ormen Lange, the giant Norwegian gasfield that achieved notoriety this year over the proven gas reserves booked by investors in the project.
The sale of BP’s 10.3 per cent stake could fetch between $600 million (£333 million) and $700 million, gas experts suggested. Ormen Lange’s gas reserves are earmarked for sale in the UK and buyers of the BP interest could include gas distributors, such as Centrica, as well as BP’s partners in the Norwegian project, which include Norsk Hydro and Shell.
BP said that it wished to sell because its holding was too small to count as strategic within its portfolio. The oil company intends to use the cash in projects where it has a controlling interest or return the proceeds to investors. However, a disposal may also avoid an argument with US regulators over the quantity of Ormen Lange reserves that are eligible for booking as “proven” under Securities and Exchange Commission (SEC) rules.
BP has booked about 80 per cent of its share of the 14 trillion cubic feet of gas believed to be recoverable in Ormen Lange. Norsk Hydro, which is leading the Ormen Lange development project, had booked a similar proportion to BP, but in June the Norwegian company cut its estimate of the gasfield’s proven reserves by 30 per cent. Norsk Hydro was following Shell, which in March reduced its Ormen Lange booking to just a fifth of its share of recoverable gas.
The highly technical controversy concerned the use of modern computer techniques to map the scale of oil and gas reservoirs, technology that is widely used in the oil industry but is still rejected by SEC regulators for counting reserves.
Ormen Lange is central to the future supply of gas to the UK. The $10 billion project includes a 1,200-kilometre pipeline connecting the gasfield to a terminal on the East Coast of England. At peak production, Ormen Lange could supply a fifth of Britain’s gas needs.
The auction of BP’s stake, which is being conducted by JP Morgan, the investment bank, is more likely to arouse interest among European utilities, such as E.ON and RWE, than upstream oil companies. Only Petoro, the state entity that owns Norway’s gas reserves, has a right to pre-empt a third-party bid for BP’s stake. Petoro already speaks for 36 per cent of Ormen Lange and is thought unlikely to want to put up funds for more.