Opinion

Ineos agrees deal for Forties Pipeline System


Ineos has agreed to pay up to US$250 million for BP's Forties Pipeline System (FPS) and associated Kinneil Terminal in the UK North Sea.

The deal will see Ineos assume responsibility for transporting around 40% of the UK's oil and gas production, the firm said on April 3.

Ineos will pay US$125 million up front to BP, with the remaining US$125 million potentially maturing over seven years under an “earn-out” arrangement, based on unspecified performance targets.

Ineos already controls the 10 million tonne (201,000 bpd) Grangemouth refining and petrochemical complex near Edinburgh, which receives around 20% of the oil currently pumped through FPS.

Grangemouth, which Ineos purchased from BP in 2005 as part of a US$9 billion deal, also has LDDPE and PP crackers with 330,000-tonne and 235,000-tonne capacities respectively.

BP's CEO, Bob Dudley, argued that recoupling FPS and Grangemouth would enable Ineos to achieve “greater efficiencies” to ensure the pipeline had a “long-term future”.

Also included in the transaction is the St Fergus-to-Cruden Bay pipeline for natural gas liquids (NGLs), and the Cruden Bay terminal.

These assets should help Ineos reduce the overheads associated with transporting feedstock to the Fife Ethylene Plant, which was designed to use NGLs extracted from the North Sea.

Ineos is on a push to create an integrated energy business model that includes upstream, midstream and downstream assets. The firm purchased the Breagh and Clipper South fields in the Southern North Sea in October 2015, taking control of around 2.85 bcm per year of gas production. Elsewhere, Ineos is looking to develop shale gas production from English assets purchased from iGas, also in October 2015, in a deal that made the company the UK's third biggest shale player.

Ineos had announced in 2014 it would spend up to US$1 billion on developing UK shale projects to yield feedstock for its downstream facilities. This strategy saw the company agree to purchase Engie's UK shale portfolio for an undisclosed sum in late March. The firm picked up stakes in 15 licences, seven of which it already participates in.

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