Shell buys BP Shearwater North Sea stake instead of Mercuria-backed Tailwind

Shell is to buy BP's 27.5% stake in the North Sea Shearwater gas and condensate hub -- currently under redevelopment -- in place of an earlier-announced deal by which the stake was to go to Tailwind Energy, a company backed by trader Mercuria, the Anglo-Dutch major said June 25.

Shell is nearing the completion of a redevelopment project to allow gas from Shearwater to be directed by pipeline to St. Fergus in northeast Scotland and nearby petrochemical facilities including the Mossmorran natural gas liquids plant, rather than Bacton in eastern England.

The deal means Shell raising its stake to 55.5%. Shearwater is due to become a conduit for a number of other North Sea gas and condensate projects in the area, such as Arran and Columbus. At peak production, the wet gas export capacity of the Shearwater hub is expected to be around 400 Mmcf/day of gas, equivalent to around 70,000 b/d of oil equivalent.

Shell "has agreed to purchase BP's interest in the Shearwater gas hub," Shell said. "This is part of a multi-year strategy following a number of earlier growth projects, to strengthen Shearwater's role as an important gas hub for UK energy supply. The move reflects Shell's strategy of focusing our upstream activities on fewer, existing positions to generate material returns for shareholders and to fund the growth of our new low-carbon portfolio."

Tailwind, created in 2016, had announced in late-May it was buying the BP stake as part of an expansion effort, building on a position it holds in fields near the Triton production vessel, operated by South Korea's Dana Petroleum. Neither Tailwind or BP responded immediately to requests for comment June 25.

A source familiar with the Shearwater project said a shutdown in preparation for the launch of the new infrastructure was expected to complete in mid-to-late July, following delays caused by the coronavirus pandemic and last year's oil price crash.

The other main partner at Shearwater is expected to be private equity-backed Neo Energy, which announced it was buying ExxonMobil's UK upstream business in February including stakes in fields in the Shearwater area.

BP has been looking to consolidate its UK upstream business, focusing on major hubs in the West of Shetland area as well as the ETAP cluster in the North Sea.