Marathon, its race run, hands baton to RockRose

Jeremy Cresswell
Jeremy Cresswell
Jeremy Cresswell
Opinion by Jeremy Cresswell

So the deed is done.

Marathon Oil has become the latest US oil major to exit the North Sea in favour of cashing in on the shale gas and oil boom on its home turf.

The question of course is, who’s next? Chevron or ConocoPhillips perhaps? I’m not betting on which of the two will be first out of the door, but the departure of both near-term is inevitable.

Meanwhile, it’s time for a few reflections on Marathon’s North Sea adventure as there’s no doubt the company played a meaningful part in the story, especially in the UK sector with the huge Brae fields complex.

And early entrant to the North Sea, Marathon hit the jack-pot in 1975 with the first of its several Brae finds, the other two core related finds being made in 1976 and ’77.

It was heaving on the UKCS.  1975 was the best year yet on the exploration hunt, with Texaco coming in with Tartan; Conoco/Statoil with the huge UK/Norwegian Statfjord discovery; Amoco, North West Hutton; Shell, Tern; Agip, Balmoral; Conoco, Britannia; Total, Alwyn North; Shell, Fulmar; Marathon, West Brae; and many others.

Like its competitors, Marathon moved swiftly to develop Brae and the first phase (Brae South) was brought onstream in 1983, followed by North in 1989.

Indeed, on the UKCS, Marathon’s story is defined by Brae and, like all other operators, the company rode the oil price cycle.

By the early 2000s, when things were tough for everyone following the late 1997 through 1999 oil price collapse, attempts were made to reshape the industry and make it more competitive.

A key scheme launched by the then new PILOT operators’ steering group was the so-called cluster initiative, which amounted to a drive to develop a crop of 42 North Sea discoveries arranged in six groups.

The idea was that, if the initiative was successful, this would generate not just more oil and gas – around 600 million boe – but also valuable additional work for contractors in Scotland, and Aberdeen in particular.

The six clusters, each of which would have a corporate champion, were named Binney, Rivers, Amy/Argo, Quad 21 South, Beechnut and Selkirk, and the champions – Conoco, Shell, Amerada Hess, Marathon and the Department of Trade and Industry (DTI) – were to report to Pilot on 5 December.

Some 25 potential clusters had been identified by the DTI, Wood Mackenzie and IHS Energy Group, with Professor Alex Kemp of Aberdeen University suggesting that further clusters might be possible. In total, it was thought that there were more than 300 small oil and gas finds in the UKCS bank for possible future exploitation.

But, as activity picked up sharply, the idea was quietly shelved and so it became business as usual-ish for everyone, including Marathon.

That is until 2014 when the company decided to get out of the North Sea and focus back home. The entire portfolio was offered for sale just as oil prices headed for the basement again following a record 10 excellent years of production.

While the Norway business sold quickly for a good price, no-one was interested in Brae or other stuff in the Marathon bag. At the end of 2014, the company gave up trying to sell the UK assets.

More than anything else, what was different this time was that North Sea production was less than half the peak reached around the Millennium, and that had made the province very vulnerable.

Marathon was struggling with Brae with any remaining ambitions for the complex scuppered by the miserable oil price and just possibly Scotland’s 2014 attempt to get clear of the shackles of England.

Reality is that Marathon’s UK assets were never really off the market. As the inevitable oil price recovery started in 2016, so interest in North Sea assets for sale warmed.

I don’t know when the discussions with RockRose began in earnest, but I figure that it was last year. Quite clearly the Oil & Gas Authority had a hand in facilitating the deal; necessarily so under its remit to maximise economic recovery from the North Sea.

I just hope that Marathon leaves its UKCS house portfolio in decent shape with no skeletons hidden in the cupboard; especially with regard to Brae and its associated infrastructure.

 

 

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