Britain needs oil tax cuts to attract North Sea investment

SLOW PACE OF DEALS

The number of oil wells drilled in the British part of the North Sea fell to the lowest level in 15 years last year, according to data from Deloitte's Petroleum Services Group.

At the same time, the number of North Sea oil and gas assets on the market has increased to 41 from 30 a year ago, data from 1Derrick shows. That includes some of Total's stake in the Laggan-Tormore field, Conoco's 24 percent stake in Clair and E.ON's North Sea book.

Mid-sized independent EnQuest is also offering a stake of 10 to 20 percent in Kraken, the heavy oil field it is currently developing. Similarly, Dana Petroleum is reported to be looking to sell up to 26 percent in its Western Isles development project.

But deals have been slow to progress, with 21 percent of assets staying on the market for more than a year in 2014, up from 13 percent in 2013, said Mangesh Hirve, managing director at Derrick.

One problem is that although oil prices have stabilised, buying assets is not yet a priority for most companies.

"Portfolio rationalisation is oriented towards survival and restructuring - buying assets is not part of the discussion," said Philip Whittaker of the Boston Consulting Group. "And even if there was appetite, the management bandwidth to get this done is very limited."

For the older assets, the problem remains one of decommissioning costs, said Andrew Moorfield, Europe-based head of origination at Canada's Scotiabank: "Decommissioning is no longer 20 years away, but in some cases only five years away."

However, when oil prices were higher, there was less incentive to come to an agreement on price. Now some deals that were on hold are starting to move forward, said Neil Leppard, a director in the energy deals team at PwC.

"It's harder for the sellers to sit back and do nothing - when capital is more restricted, the focus on where you deploy it becomes more important to the board," he said.