While the Oil and Gas majors continue to depart the UK North Sea...

While the Oil and Gas majors continue to depart the UK North Sea private firms, like Viaro and Prax Group, are buying in at fire sale prices. There is no certainty that Labour will amend their policies so has Viaro found a work around solution?

Viaro are close to buying Clipper and Leman Alpha field clusters from Shell/Exon. (which includes Leman A) Viaro also already own 20% of Bacton.



Gas from Phase 1 is planned to be transferred to Corvette/Leman A to Bacton with the JV to pay a toll to Shell for use of their infrastructure. If the transaction is completed the JV will be negotiating with Viaro with regard to the toll payable.

Hartshead said in April that

"Hartshead is also continuing discussions on project finance and is in discussions on infrastructure funding that has the potential to significantly reduce the upfront CAPEX required by the JV, associated with the Phase 1 development project. This would be positive
in respect to whole project economics, moving CAPEX into OPEX via a tariff payable in respect of third party infrastructure investment, and in respect of Hartshead funding, reducing the funding requirement that Hartshead would need to meet outside the RockRose carry."

If Viaro does acquire Leman A there is then the potential to revise the tolling agreement to include all of the infrastructure for Phase 1. So "Viaro Infrastructure Fund" owns all of Phase 1 assets and Leman A. The JV is the end user who pays a toll per BTU for use of the infrastructure.

This structure could provide a workaround tax solution to Labour Policies as
- capex is limited to reduce the impact of no Investment allowance
- operating profit is reduced by the tariff payable with reduces the 78% windfall tax

One option worth watching out for if Viaro completes the deal with Shell/Exxon.