North Sea new wave ousts giants

After two decades of dominating the North Sea, major oil companies like BP and Shell are set to be pushed out by smaller, nimbler players.

Industry experts are predicting a "feeding frenzy" as independent oil companies from around the world rush to buy up assets now being dropped by the so-called "super majors" that once consolidated North Sea activity. BP is expected to sell off more than £2bn worth of assets from the North Sea next year, and analysts are predicting others will follow suit.

The ambitions of the independents are mainly fuelled by the Department of Trade and Industry (DTI), which is behind a massive drive to support them in their efforts to bid for the majors' fields.

Last week's purchase of a chunk of BP's North Sea assets by the Paladin Resources, whose market value is just £184m, is the latest example of a trend that is gathering speed. "There is unquestionably a big sell-off in the North Sea," said the group's chief executive Roy Franklin, "and companies like ours are ready to pounce."

Behind the exodus by the majors lie two factors. The first is that the North Sea is now a "mature province": it has a finite amount of production left in it and the big companies would rather direct their attentions to other parts of the world. The second is the North Sea tax introduced in last year's Budget, which delivered a huge blow to the majors' operating margins.

These issues also worry the DTI, and particularly the energy minister Brian Wilson. As chairman of the 1999 Pilot initiative, he was responsible for seeing that the North Sea was attractive to investment in its twilight years, and that Britain's supplies of oil and gas remained stable.

But the North Sea tax was a serious setback for Pilot. "Before the tax, industry believed it had a good relationship with government," said Dana Petroleum's chief executive Tom Cross. "I now know oil companies in the US that see the UK and Indonesia on the same risk level."

Mr Wilson admits it has been a "rocky time" since the Budget. He is now focused on a scheme that could end the dominance of the oil majors in the North Sea by returning fields to smaller companies.