BP and Serica set completion date for BKR deal after receipt of OFAC license

Serica Energy and BP have received a conditional license and assurance from the U.S. Office of Foreign Assets Control (OFAC) relating to the UK North Sea Rhum field. This will enable Serica to move forward with acquisition of BP’s interests in the Bruce, Keith, and Rhum fields.

Serica is in the process of buying BP’s interests in the Bruce, Keith, and Rhum (BKR) fields. However, the completion of the deal has experienced delays because Iranian Oil Company holds a 50% stake in the Rhum field, making the field potentially “vulnerable” to the new sanctions regime against Iran announced by the U.S. government on May 8.

Some of the sanctions were imposed earlier, but those related to the energy sector are expected to take place following the 180-day wind-down period ending on November 4, 2018.

The receipt of the conditional license on Tuesday follows the receipt of a temporary license granted by OFAC at the beginning of October.

Serica said on Tuesday that, subject to the fulfillment of the conditions, the license will allow certain U.S. and U.S.-owned or controlled entities to provide goods, services and support involving Rhum.

According to Serica, OFAC has also provided an assurance that non-U.S. entities providing goods, services and support involving Rhum will not be exposed to U.S. secondary sanctions.

These OFAC actions will enable production from the Rhum field to continue unaffected, Serica explained. Following previous practice, the OFAC License is valid until October 31, 2019, but may be renewed (together with the assurance) on application by Serica UK assuming the conditions continue to be met.

The license and assurance are conditional upon arrangements being put in place by November 4, 2018 relating to the interest in the Rhum field held by Iranian Oil Company (U.K.) Limited (IOC). These arrangements are well advanced and will provide that all benefits accruing from and relating to IOC’s interest in the Rhum field will be held in escrow for such period as U.S. sanctions apply and ensure that neither IOC nor any direct or indirect parent company of IOC will derive any economic benefit from the Rhum field during that period. IOC will also exercise no decision-making powers in respect of Rhum during the same period.

Completion date 

Receipt of the license and assurance fulfills a major condition of the sale and purchase agreement announced in November 2017 under which Serica UK will acquire BP’s interests in the Bruce, Keith and Rhum fields. Serica UK and BP are now able to put in place the final arrangements to complete the BKR transaction and for Serica UK and Total to complete the related transaction announced in August 2018 under which Serica UK will acquire Total’s non-operated interests in the Bruce and Keith fields.

Serica noted that, for operational reasons, the transition of operatorship must take place at the start or end of the month and the actual date must be fixed sufficiently in advance. Taking these factors into account, BP and Serica UK have agreed on November 30 as the revised completion date for the BKR Transaction. Although slightly later than the previously announced target of early November, this will enable the arrangements required by OFAC to be put in place prior to completion and ensure an orderly, safe and efficient transition.

Mitch Flegg, Chief Executive of Serica Energy, commented: “The receipt of the license and assurance from OFAC is an important step towards ensuring the integrity of ongoing operations from this important North Sea field which makes a significant contribution to UK indigenous gas production. We welcome the constructive approach taken by all parties. This outcome protects a valuable British asset which, together with the Bruce and Keith fields, produces about 5% of UK offshore gas production.”

Flegg added: “Serica is now able to move forward to completing the BP and Total transactions, allowing us to focus on optimizing the full performance of the Bruce, Keith and Rhum fields, extend production life where possible and ensure maximum economic recovery of remaining reserves to the UK’s benefit.  With all parties committed to completion, Serica is close to fulfilling its objective of becoming a leading UK independent offshore operator and producer and looks forward to welcoming the operations and onshore staff joining Serica from BP.”

Offshore Energy Today Staff