BP agrees deal to extend UK West of Shetland Foinaven production

London — BP has agreed a deal with service providers intended to ensure the long-term future of Foinaven, its longest-producing oil field in the UK West of Shetland area, it said Friday, signalling an end to a period of uncertainty over the field's production facility.

The announcement extending BP's use of the Petrojarl production vessel appears to reinforce the company's presence in the West of Shetland area, where it recently overhauled the two largest producing fields, Clair and Schiehallion.

In production since 1997, Foinaven was the first of the deepwater West of Shetland fields to come on stream, with production peaking at 113,000 b/d in 2002, before falling back to 20,000 b/d.

However, Foinaven was shut down for a longer-than-expected period of maintenance last year, and BP was considering replacing the Petrojarl floating production, storage and offloading vessel with a new, possibly more energy-efficient facility, as it considered the field's future.

The West of Shetland region is viewed as the main hope for prolonging UK oil production, but also a high-cost location with major technical challenges, and BP was looking to cut costs there even before the oil price crash induced by COVID-19. It has been looking at the possibility of no longer loading Clair crude at the Shetland Islands' Sullom Voe terminal, instead sending it straight to market from the field.

Under Friday's agreement BP has signed a 'bareboat' charter with Teekay Corp, provider of the Petrojarl FPSO, extending its use for another decade. The agreement entails an upfront payment of $67 million followed by a "nominal" day rate and a lump sum at the end for recycling the vessel.

It has also signed contracts with Altera Infrastructure for operation of the Petrojarl FPSO and provision of the shuttle tanker service to ship the crude to market.

The deal represents "an innovative contractual framework for the FPSO's operating services and shuttle tanker provision, giving BP greater influence over the strategic direction of operations," BP regional president Ariel Flores said. "It will also help ensure safe, reliable and efficient operations out to at least 2025 and give us space to set the Foinaven area up for future success.”

Foinaven crude, like other West of Shetland crudes, is heavier than that from the conventional North Sea, with an API gravity of 26.4.

Foinaven prospectivity

Speaking to S&P Global Platts last September, Flores had noted the field's propensity for lengthy shutdowns, but also its continued prospectivity, saying "the reserves are absolutely there".

That view was echoed Friday by Andrew Austin, CEO of RockRose Energy, BP's partner at the field with a 28% stake obtained when it bought US company Marathon's Oil's UK assets last year.

"Foinaven is a functioning, producing area. It is not the cheapest barrel we produce in our portfolio, but it is probably more understood and there are probably more barrels under the sea there ready to be recovered than there are in a lot of our other areas," Austin told Platts.

"We see the whole Foinaven area as a very interesting place to operate in and we do have a functioning hydrocarbon and export system at the moment in the shape of the vessel that is on that site."

BP said Friday it would "evaluate options for redevelopment" of Foinaven.