A COMPANY that raised more than $600m to breathe new life into the North Sea has given up on it and instead plans to cash in on its demise.
Fairfield Energy was set up a decade ago to scoop up legacy operations cast off by the giants of the oil industry. The private equity backed company decided recently to reverse that strategy. It plans to become a decommissioning specialist that will make money by taking apart mothballed platforms and pipelines.
The conversion of Fairfield, which once had the backing of Lord Browne of Madingley — the former BP chief executive stepped down from the board this year — is the starkest sign yet of the damage caused by the 60% drop in the oil price.
Half a century after the start of production in the area, the North Sea is dogged by sky-high operating costs and dwindling returns. The fall in the crude price, from $115 a barrel last summer to less than $44 on Friday, has pushed most operations into a loss. Companies including BP and the contractor Wood Group have already slashed thousands of jobs.
The situation has been exacerbated by clashes with unions. Helicopter pilots and offshore workers are threatening to strike over redundancies and changes to shift patterns.
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The case of Fairfield is particularly poignant because it was set up to extend the life of the North Sea by investing in operations that had been neglected. In June it shut down its Dunlin field, a 37-year-old reservoir whose production had slowed to a trickle. Its share of its last producing asset, a field called Clipper South, has also been quietly put up for sale.
There are more than 300 platforms in the North Sea and thousands of miles of pipelines. Taking all of that apart is expected to take decades and cost more than £30bn. If low prices persist, the mass dismantling could start much sooner than expected.
Fairfield has begun hiring decommissioning professionals for the expected flurry of work.The company was set up with $200m from a group of investors led by Warburg Pincus, the US giant. Over its life it raised more than $600m, including a $150m injection from Riverstone, the investment fund that Browne ran until stepping down this year. Fairfield declined to comment.