Centrica to stay in oil and gas after divestment push falls short

0


Centrica will continue producing gas in the UK for the next decade after it failed to find a suitable buyer for all of its upstream fossil fuels joint-business, Spirit Energy.

The company said on Wednesday it had agreed deals to dispose of Spirit Energy’s Norwegian oil and gas assets, as well as its interests in the Statfjord area that straddles the Norwegian and UK continental shelves, for a total of £800m.

Centrica had put the whole of Spirit Energy, in which it has a 69 per cent holding, up for sale in 2019. But Chris O’Shea, chief executive, said bids for the entire business had come from companies that would not be “suitable counterparts”, as he did not believe they would live up to responsibilities for decommissioning oil and gasfields at the end of their operational life.

The disposal of the Norwegian assets leaves Centrica with largely mature gasfields in the UK and the Netherlands, from which the group will now continue to produce for the next decade, although it insisted that it would no longer carry out any exploration.

It intends to set aside the majority of the income from the remaining upstream business to pay for the eventual decommissioning of its assets, although O’Shea said the group would look for opportunities to repurpose fields and infrastructure where possible, for example as possible carbon stores.

The buyers of the Norwegian assets, privately owned Norwegian group Sval Energi and energy major Equinor, will also take on the associated decommissioning liabilities estimated at about £830m.

Centrica admitted the sales of the Norwegian assets would have a “significant near-term dilutive effect on earnings per share”, although it insisted the company’s simpler structure would result in “greater predictability of earnings”.

It also highlighted the transfer of the decommissioning liabilities as a significant component of the deals.

Shares in Centrica were flat in London at lunchtime at about 67.5p.

The sale of the upstream assets is part of a wider disposal strategy in recent years as Centrica has concentrated on customer-facing businesses, in particular energy supply in Britain.

That market has been rocked by the sharp increase in wholesale gas and electricity prices this year. More than 25 rival suppliers have gone bust since the start of August.

O’Shea told the Financial Times there would need to be a “root and branch review” of the regulation of the British energy supply market. He has called for tighter prudential regulation of suppliers, including making sure companies do not misuse customers’ credits that have built up via direct debit payments to meet other financial obligations.



Source link

Leave A Reply

Your email address will not be published.