ConocoPhillips (NYSE: COP) Taps New Natural Gas Field

Brian Hicks

Written By Brian Hicks

Posted November 22, 2013

ConocoPhillips (NYSE: COP) made an announcement Wednesday morning that it will begin production of natural gas at its Jasmine field in the North Sea.

The Jasmine field is located off the coast of the United Kingdom in the central North Sea, and it is one of the U.K.’s largest discoveries in the last 10 years.

conoco philips logoHouston-based Conoco began production in the field on Tuesday, seven years after its initial discovery. The company has been biding its time, to say the least, but as most oil majors have sold off their North Sea assets, ConocoPhillips is poised to prosper.

Jasmine is the largest discovery since the Buzzard field began production in 2007 – the biggest field in the North Sea in the past 25 years, producing as much as 190,000 barrels of oil equivalent per day.

In contrast, the Jasmine has the capability to produce as much as 140,000 barrels of oil equivalent per day, with as much as 40,000 barrels per day by next year for Conoco, according to FuelFix. The play is a key component to Conoco’s plans to increase its production.

Conoco has two partners in the project: BG Group PLC (LSE: BG) and Eni SpA (NYSE: E).

BG Group, a natural gas company out of the U.K., also announced Wednesday that it had started production, rounding out a big 2013 for them. The company is likely to see roughly 30,000 barrels per day from the play by next year.

North Sea Production

Wednesday’s announcement is just the latest of several major moves to ensure that Conoco will realize a 3 to 5 percent growth rate in production through 2017, according to FuelFix.

Recent success with its startup of Ekofisk South, 200 miles southwest of Stavanger, Norway and its Christina Lake Phase E oil sands project in Canada, along with further investments in the North Sea, support Conoco’s future growth plans.

In the North Sea alone, Conoco intends to add another 60,000 barrels by 2017 on top of what it will produce in the Jasmine, according to FuelFix.

Others don’t share in the appeal to develop in the North Sea. Majors like BP (NYSE: BP) and Shell (NYSE: RDS-A) have sold off all their assets to smaller producers in favor of other holdings.

But Tullow Oil Plc (LSE: TLW) has delayed its sale of both its U.K. and Dutch assets in the North Sea until 2015, saying the package is too big to attract the right buyer.

Instead, Tullow wants to drill in Africa and Latin America while it attracts offers for its North Sea assets. According to BusinessWeek, the fields that produce about 18,000 barrels of oil equivalent per day will, in all hopes, be disposed of in the next year to 18 months.

The value is definitely there. But the magnitude seems to be a bit off-putting, and financing such an undertaking can prove quite difficult. The assets would need to be restructured into smaller, more manageable parts.

Financing is not a problem for Conoco and its Jasmine partners though. They have secured all of their rights and will be in the North Sea for some time to come.

Investing in the North Sea

When it comes to North Sea assets, it’s all about value and proving you have what it takes to realize that value.

ConocoPhillips is the operator of the Jasmine field project and its largest shareholder, with 36.5 percent ownership in the play. Eni, the Italian-based multinational oil and gas company, holds a 33 percent stake in the project, and BG Group owns the remaining 30.5 percent.

While these three companies aren’t exactly lighting any fires with individual projects, I would suspect that after this week, things will start to turn up once again for all three.

ConocoPhillips will realize its objective to see a 3 to 5 percent increase in overall production growth by 2017.

This week’s happenings will help see that through.


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