September 2016, Vol. 243, No. 9


Deloitte: North Sea Pipeline Deals to Rise this Year

The North Sea will see a rise in infrastructure deals this year, with private equity funds playing an increasing role in midstream assets, according to business advisory firm Deloitte.

Against the backdrop of a low oil price, more oil and gas companies are looking to rationalize their portfolios and divest non-core assets in the UK Continental Shelf (UKCS), the firm said – with private equity and specialist infrastructure funds likely purchasers.

Deloitte’s latest European Infrastructure Investors survey found that pipelines in particular have provided a solid and steady return over the last five years. The asset class was highlighted by investors as performing well compared with other infrastructure, including fuel storage, ports and renewables; the internal rate of return on pipelines reached 14% in the period 2013-2016.

Deloitte’s report also found pipelines will remain a strong focus for infrastructure investors in the future, along with gas and fuel storage.

“Historically, big oil and gas operators developed and owned what they needed, transporting their major discoveries through proprietary pipelines and refining it in their own processing plants.” said Shaun Reynolds, director, Transaction Services, at Deloitte “That’s largely remained the case until the last two or three years.”

In 2015, BP sold its stake in the Central Area Transmission System (CATS) to Antin Infrastructure Partners in a £324 million deal. Antin had bought BG Group out of its stake the previous year, giving it near-complete ownership of the asset.

“The ownership model has evolved, driven by the maturity of the basin and the low oil price. Established players are divesting to shore up their balance sheets, and infrastructure is comparatively less complex to value and sell, with a ready market at the right price,” Reynolds said.

The third-party ownership model has been employed successfully in the U.S. shale gas market for years while oil and gas infrastructure in the Netherlands and Norway is commonly owned by private equity or pension funds. Reynolds said the changing asset stewardship of North Sea infrastructure could be a positive development for the industry, with 20 billion bbls still recoverable in the basin.

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