THE NEW RUSSIAN EMPIRE - 8
Russian billionaire Mikhail Fridman's LetterOne Group is in advanced talks to buy stakes in big oil and gasfields in the Norwegian North Sea owned by Germany's Eon, in a $1bn-plus deal.
The transaction would highlight the ambitions of LetterOne, where Lord Browne, the former BP chief executive, runs its energy arm, to become a global oil and gas group by snapping up attractive assets following the collapse in crude prices.
As well as the North Sea, LetterOne is looking at opportunities in North America, where it hopes to build a significant presence, and Mexico, which is auctioning a series of offshore exploration blocks.
An announcement on the Eon sale to LetterOne is expected to be made within days, said one source familiar with the negotiations, though this person cautioned that an agreement was still being finalised.
Eon, the German utility, has interests in several sizeable offshore Norwegian fields.
It owns a 28.1 per cent stake in the Skarv field, operated by BP and expected to reach peak output of 165,000 barrels of oil equivalent a day. It also owns a 30 per cent stake in the Statoil-operated Njord field, and a 17.5 per cent holding in the small Hyme field, also run by the Norwegian energy company.
Analysts have put a book value of $1.2bn on the stakes and it is thought Eon is likely to achieve something close to that valuation.
The German group is pursuing the sale of its entire North Sea portfolio, which include UK fields, and Eon looks likely conclude the disposal through two separate deals.
Talks over the sale of its UK assets are taking place with several parties. It operates the Huntington field and has interests in others, including Elgin and Franklin.
The purchase of Eon's Norwegian assets would be part of a broader restructuring by LetterOne.
Industry insiders said that LetterOne was likely to sell its UK North Sea gasfields to Ineos, the Switzerland-based chemicals group run by billionaire Jim Ratcliffe.
LetterOne would dispose of fields it acquired earlier this year with its €5bn purchase of Dea, the oil and gas business previously owned by Germany's RWE.
The sale price for the fields is likely to come in below the $1.1bn valuation placed on them by LetterOne, which was ordered to dispose of the assets by the UK government in April.
Recent bids for the fields, principally Breagh and Clipper South, are thought to have come in at about the $700m mark.
The UK government came out against the Dea deal, arguing that future sanctions against Russia over the Ukraine crisis could shut down the fields and imperil North Sea supplies. LetterOne and Eon declined to comment.
Ineos has made no secret of its interest in building a substantial gas supply business, including entering the North Sea through acquisition.
The company is at the forefront of efforts to replicate the US shale revolution in Britain, hoping to deploy "fracking" technology to unlock oil and gas reserves that could fuel its giant Grangemouth petrochemicals complex in Scotland.
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