British oil giant,
) announced the successful start-up of the $1.04 billion (£650
million) Devenick gas project, a large offshore field in the
Central North Sea in the U.K.
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Devenick is a high-pressure, high temperature (HPHT) gas condensate
field − discovered back in 1983. It is estimated to contain 430
billion standard cubic feet of gas. The field has been tied back
with a 16 inch pipeline to the
Marathon Oil Corporation
) operated East Brae platform to facilitate domestic gas supply for
Located 34 kilometer north of the East Brae platform in the Central
North Sea, the Devenick field is projected to reach its peak
production of up to 100 million standard cubic feet of gas per day
(MMscf/d) next year and last until 2025.
BP owns 88.7% of Devenick and its partner on the project, RWE Dea
UK, holds the remaining 11.3%. The company expects to expend net
$10 billion over the next five years in the North Sea comprising
major ventures in U.K. and Norway. Apart from Devenick, BP has
three other major ongoing projects offshore U.K. that include:
Clair Ridge, Quad 204 (Schiehallion) and Kinnoull. Additionally, it
includes Skarv and Valhall redevelopment in Norway.
Fossil fuel productions in Britain will likely turn down in the
near future, thereby leaving U.K. to rely upon imported
hydrocarbon. Following the successful start-up of the Devenick
project, U.K. gas production will see an approximate 3% boost from
the current level. This is expected to be sufficient enough to
deliver the equivalent of more than half a million homes annually.
London, England-based BP is one of the world's largest energy
companies. BP retains a Zacks #3 Rank, which is equivalent to a
Hold rating for a period of one to three months. We maintain our
long-term Neutral recommendation for the company.
We consider the gradual economic recovery after the Gulf of Mexico
(GoM) tragedy and BP's focus on upstream activity as favorable
factors. Management remains positive on the company's growth
profile and looks forward to recovery, as well as consolidation, in
order to reduce operational risk or oil spill-related assignments.
We believe the company's new strategy of active portfolio
management, higher exploration activity, and refining and marketing
repositioning will generate value for shareholders. Its focus on a
string of upstream activities in high margin areas like the GoM,
Angola, the North Sea, Brazil, Australia and India bode well for
its future growth.
However, we remain apprehensive following BP's weak second-quarter
performance. BP also projected a lower production level for the
year on a year-over-year basis. The GoM spill in 2010 and the
failed Russian Arctic deal have undoubtedly weighed on BP