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Ineos E&P in the black and ready to expand its North Sea exploration portfolio

One of the UK’s richest men is looking to expand his North Sea oil and gas portfolio after his exploration and production (E&P) business returned to profitability in 2018.

Jim Ratcliffe is the multibillionaire behind international petrochemical giant Ineos, whose E&P UK business is one of a string of newer players at the heart of a changing of the guard in the UK North Sea.

Earlier this year, Ineos announced it was investing £500 million to extend the life of the Forties Pipeline System by “at least 20 years” in a move hailed by
industry leaders as a show of faith in the North Sea’s future.

The group has also been at the heart of talk about possible acquisitions as some of the big US oil giants exit the region.

Accounts released by Companies House yesterday show Ineos E&P UK made pre-tax profits of nearly £100 million last year, compared with losses of £47.3m in 2017.

Revenue for the latest period totalled £200.2m, up from £153.5m previously as the firm cashed in from its 20% stake in a string of licences – Laggan, Tormore, Edradour and Glenlivet – making up the Total-operated Greater Laggan Area about 78 miles north-west of Shetland.

Signing off the figures, Ineos chief financial officer Andrew Pizzey said the business enjoyed “excellent” operational performance, while exploration activity was boosted by the Glendronach gas discovery.

Experts say Glendronach – the fifth largest conventional gas discovery in the UK North Sea since 2000 – may contribute as much as 10% of the UK’ annual gas production in its early years. Ineos owns 20%, alongside SSE (20%) and operator Total (60%).

Mr Pizzey said: “The results of this well are still being evaluated with a view to developing it.”

He added: “The directors are satisfied with the results for the year and expect the company to participate in future licence rounds, with the objective of expanding the exploration portfolio west of Shetland. Other activities will include studies to evaluate prospectivity in existing licences in order to mature prospects for drilling.”

Ineos began building its North Sea portfolio in 2015, buying 12 UK North Sea fields from Dea, a German-based oil and gas firm that was owned by the Russian oligarch-backed LetterOne Group.

The deal, believed to be worth up to £500 million, involved stakes in the Breagh and Clipper South gas fields in the southern North Sea.

Ineos – owner of the huge petrochemicals complex and oil refinery at Grangemouth – went on to acquire a 25% interest in the Clipper South field from Fairfield Energy and secure a £220m reserve-based lending facility to fund its entry into the North Sea.

In 2016, the company reportedly had a £1.4 billion takeover bid for the UK arm of ConocoPhillips rebuffed by the US firm.

The same two companues were involved in talks over a potential deal much more recently, but London-based Ineos announced in January that its bid to prize the assets away from US ownership had fallen through.

Ineos was also named in reports earlier this year as a possible front-runner to buy Chevron’s central North Sea assets

That was before Israeli-owned Ithaca Energy snapped up the bulk of Chevron’s UK North Sea business in a £1.6bn deal.

Ineos E&P (UK)’s accounts for 2018 highlight a sale and purchase agreement which saw Canadian-owned Suncor Energy UK take on interests in licence areas including the Rosebank field and related capacity in the Shetland Islands Regional Gas Export System. The transaction was completed on June 29 and a gain of £17.3m was booked in the 2018 accounts.

With annual sales of around £48bn last year, the wider Ineos group is a leading manufacturer of petrochemicals, speciality chemicals and oil products. The company has 34 businesses, with a production network spanning 171 manufacturing facilities in 24 countries.

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