UK gives Mikhail Fridman three months to sell North Sea gas fields

Ed Davey, UK energy secretary, has given Russian billionaire Mikhail Fridman just three months to sell a dozen North Sea gas fields owned by his $10bn oil and gas fund L1 Energy, or face the loss of their operating licences.

In a statement on Monday, the Department of Energy and Climate Change (DECC) stepped up the pressure on Mr Fridman's LetterOne Group to dispose of the fields, acquired as part of a €5.1bn deal in March to buy Germany utility RWE's oil and gas arm. Mr Davey imposed a three-month deadline on the sale, but also offered to extend this to six months.

The move comes just weeks after L1 Energy - run by former BP chief executive Lord Browne - began preparing the sale of the assets in an attempt to avert a high-profile legal battle.

The government has already voiced its opposition to the deal on the grounds that future sanctions against Russia could shut down the fields and imperil North Sea supplies. But its initial response met with a furious reaction from Mr Fridman, who threatened legal action before exploring a disposal.

Mr Davey's latest move appears designed to hold Mr Fridman to the proposed disposal amid speculation that LetterOne could use the time to wait until after the forthcoming general election in May and test the ground with a new administration before proceeding.

Though DECC's deadline is after the election, there is now limited time for L1 Energy to find a buyer in a depressed North Sea market, where dealmaking has all but dried up following a collapse in oil prices.

"This decision was taken after a thorough review of all relevant information as well as obtaining cross-government views," the department said on its website. It added that Mr Davey would await LetterOne's response to his offer to give it six months to dispose of the fields.

L1 Energy declined to comment.

The case highlights how Russian businessmen risk finding themselves caught in the crossfire because of international sanctions over the Ukraine conflict. The UK is the first western government to intervene in a corporate transaction over the risk of further punitive action against Moscow.

LetterOne, which is looking at a sale or an asset swap, had argued that a trust-style arrangement using a body based in the Netherlands would protect the fields if more sanctions were imposed.

But, rather than risk a distracting legal battle, Mr Fridman is understood to be ready to press on with building an international energy business without the North Sea fields, which account for 3-5 per cent of UK gas output. No final decision has been taken.

With other sellers of North Sea assets including French oil major Total also in the market, agreeing on a valuation could be tricky.

L1 Energy has also decided there is little potential for growth in the UK North Sea, despite tax cuts announced in the UK Budget last month, and will look elsewhere as it hunts "value" via partnership deals and acquisitions.

Four-fifths of L1 Energy's activities are outside Britain - including in Norway, Egypt, Libya, Germany, Poland, Turkmenistan and Algeria.

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