BP Plc agreed to sell the Forties pipeline, one of the most important pieces of oil infrastructure in the U.K. North Sea, to Ineos AG for $250 million.
Ineos will make a cash payment of $125 million on completion and transfer a share of future earnings up to $125 million over seven years, BP said in a statement Monday. The London-based oil producer will retain rights to use the pipeline system’s capacity.
The two companies confirmed last month they were in discussions for the pipeline, which transports crude used to set the price of Dated Brent, the benchmark for more than half the world’s oil. BP is selling assets to help pay for the 2010 oil spill in the U.S. Gulf of Mexico, for which it set aside more than $50 billion. It also needs to bring down debt and maintain dividends as oil continues to trade at half its level of 2014.
“While the Forties pipeline had great significance in BP’s history, our business here is now centered around our major offshore interests west of Shetland and in the central North Sea,” BP Chief Executive Officer Bob Dudley said. “The pipeline has long been an important feedstock supplier to Ineos at Grangemouth.”
The pipeline system was originally built to transport oil from the Forties field, which was discovered in 1970, to the Grangemouth refinery near Edinburgh. In the following decades additional discoveries were connected to the system, including Buzzard, currently the U.K.’s largest field. BP sold the Forties field to Apache Corp. in 2003 and the refinery to Ineos in 2005, while retaining control of the pipelines.
Petrochemical producer Ineos has been expanding in oil and gas exploration, buying a portfolio of 15 U.K. licenses from Engie SA earlier this year. It also has emerged as the lead bidder for Dong Energy A/S’s exploration and production unit in the North Sea, people familiar with the matter said last month.
The Forties Pipeline System has a capacity of 575,000 barrels a day and transported an average of 445,000 barrels a day last year, BP said. Of that, about 55,000 barrels a day came from fields operated by BP.