SSE (Scottish and Southern Energy plc), through its wholly-owned subsidiary SSE E&P UK Limited, has entered into an agreement with Hess Limited to acquire its natural gas assets and infrastructure in three regions of the North Sea (Everest/Lomond Area; Easington Catchment Area; and Bacton Area).

SSE will pay a total cash consideration of $423million for Hess’ assets.  The transaction is subject to the receipt of all necessary partner and regulatory approvals.

The total gas and liquid resources which SSE is acquiring total around 383billion cubic feet (bcf) or 64million barrels of oil equivalent (mmboe).  The headline transaction price for these resources is $6.6/barrels of oil equivalent (boe) or $1.1/million cubic feet (mcf).  Additional, less certain resources of gas may also be identified through further exploration.  The main production asset operators are BG Group, BP and Perenco.

SSE currently needs on average around 1300 mcf of gas per day to supply its customers and to fuel its power stations and gas from the acquired assets will provide around 8% of that initially, declining over the next 10 years.

While the upstream gas assets represent the large majority of the transaction, SSE will also acquire a number of other assets from Hess including its 17.7% equity interest in the Central Area Transmission System (CATS) pipeline, which delivers over 10% of the UK’s total gas demand through a 400km pipeline from the central North Sea to a processing terminal in Teesside.  The CATS pipeline is operated by BP.

Ian Marchant, Chief Executive of SSE, said:

“This timely acquisition will enable SSE to enter the upstream gas sector in a measured way by buying proven and geographically diverse production assets. These assets will provide a new source of primary fuel and a hedge for our gas generation and supply activities. The acquisition will also give us involvement throughout the gas chain-production, transmission, storage, distribution and supply.”