BP Plc (BP) along with its partners has announced an investment of up to 700 million pounds ($1.1 billion) for the development of the Kinnoull reservoir in central North Sea after the project was approved by the U.K. government.
Kinnoull is the largest of the three reservoirs being developed to tap prospects in the Andrew area in the North Sea, around north-east of Aberdeen. Kinnoull contains 45 million barrels of oil equivalent and the investment will stretch its production life beyond 2020.
Output from Kinnoull is estimated to peak at 45,000 barrels per day, once the new facilities begin operations in 2013. The reservoir is well connected to Kinneil and Teesside via the existing Forties and CATS pipeline systems, respectively.
The reservoir will be linked to BP’s Andrew platform, which will be modified to accommodate the new production fluids from Kinnoull and assist production at Lower Cretaceous –– the reservoir below. The Andrew platform is expected to remain closed for 18 months while it is being upgraded, so as not to upset operations at the existing facilities.
BP has a 77% interest in the reservoir while Eni SpA (E) and Summit Oil International hold 16.7% and 6.3%, respectively. The project will set up a new subsea system and caisson onto the Andrew platform, to facilitate access to the new reservoir.
We believe exploration success is the key for the company to deliver strong future growth and re-establish its position following the oil spill. Hence, the recent development in the North Sea goes to show the efforts BP is making on redefining its image.
BP’s active participation in the North Sea region also includes redevelopment of the Schiehallion and Loyal fields. Other projects awaiting government approval are the major Clair Ridge project, along with another U.K. subsea tie-back, Devenick.
BP holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. For the long term, we maintain a Neutral rating on the stock and expect it to perform in line with the broader market indices.
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