Taqa’s UK operation has a $1billion contingency plan for North Sea decommissioning.
The Abu Dhabi based operator said its Bratani wing has entered into decommissioning deeds for some of its North Sea assets.
Due to this, the company may be required to provide “financial security” to the former owners either by putting money in a trust or issued by letters of credit, or by way of a credit guarantee or other security.
However the North Sea operator’s parent group has, since the provision of the deeds, been downgraded below the minimum credit rating specified in the paperwork.
Despite “good faith” talks with the other parties to the deeds regarding the replacement or supplement of the parent guarantee, “no outcomes were concluded” and the original guarantee remains in place.
Further to that, the changes in the UK’s stance on post-tax decommissioning liability has introduced a legislative framework, on which Taqa Bratani expects to base future talks with the other parties.
In a half year report, Taqa Group notes: “If the group was required to replace the parent guarantee in its entirety, the amount it would have to procure through the issuance of letters of credit or other collateral, could be in excess of $1billion.
“In respect of certain other North Sea assets acquired by members of the group, the group is able to meet the security arrangements for decommissioning obligations by way of provision of a parent company guarantee, so long as the group continues in majority – ownership of the Government of Abu Dhabi.”
A spokeswoman for the firm said the arrangement has been known abpout for “many years” and it is not thought to be required.
She said: “TAQA has parent company guarantees in place supporting our decommissioning obligations in the North Sea, which is standard practice for the industry in the UK North Sea.
“The disclosure has been made in the TAQA financial statements for many years and refers to a scenario where we had to replace guarantees with letters of credit, which we do not believe is or will be required.
“However, if required we would expect this to be on a post-tax basis. TAQA has a strong credit rating (A-/A3) and has received strong ongoing support from the Abu Dhabi government, which represents the majority shareholding in TAQA.”
Taqa operates the Cormorant Alpha, Eider, North Cormorant, Tern Alpha and Harding assets in the North Sea.
Taqa’s European division saw production fall this year, down from 63.2mmboe to 52.2mmboe as of June 30.
Donald Taylor, TAQA Europe’s managing director, said: “During the first half of 2017, TAQA’s European business has continued to deliver steady production, averaging 52,000 boe/d.
“Although a decline compared to the same period last year, primarily as a result of fewer new projects coming on-stream, we have recently sanctioned a number of new projects that will support us in achieving a safe and successful future.
“New projects include the redevelopment of our Otter field in the northern North Sea, where we are installing a new multi-phase pump to maximise production; and bypassing TAQA’s Eider platform so that Otter production flows directly to TAQA’s North Cormorant platform, reducing operating costs and supporting life-extension of our northern North Sea assets.
“We have also committed to a long-term mobile drilling rig contract from 2018 with Paragon Asset (UK) Ltd., for the development of new and existing wells and the plug and abandonment of wells no longer in use.”
He added: “Looking ahead to the second half of 2017, we have shutdowns planned on all of TAQA’s northern North Sea platforms (Tern, Cormorant Alpha, Eider and North Cormorant). The safe and efficient delivery of these is key to our production out-turn for the year.
“We will continue to focus on maintaining discipline over operating costs, enabling us to benefit from the improving oil price outlook, to drive our financial performance during the second half of the year.”
Overall Taqa Group has swung back into profit on the back of steadier oil and gas prices.
The firm increased global half year revenues of 8.3billion United Arab Emirates Dirham (AED) for the six months to the end of June.
This was up from 7.9billion AED posted in the same period last year.
The bottom line was turned around from last June’s posted loss of 1.4billion AED to a profit of 1.3billion AED.
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