Mongstad Group is an owner of key infrastructure and landlord to two high activity oil and gas (“O&G”) ports in Norway. The Company owns land, buildings, storage facilities, piping, roads, quays and other infrastructure on site, which enables handling of 1,000,000+ tonnes over quay and ~3,000 ship arrivals/year.
Mongstad Group is headquartered at the Mongstad port outside Bergen and has long-term contracts with solid counterparties. Statoil, the main tenant, in 2013 announced new sailing routes in order to achieve cost and environmental savings, which significantly increased activity at the base after being fully implemented in 2015.
The supply base now supports about 20 producing O&G installations in the Northern North Sea and is located close to large fields such as Troll, Oseberg and Gullfaks (longevity estimated to the 2060s).
The supply base operator (CCB Mongstad) is a tenant who offers complementary services within logistics, repair and maintenance through both in-house competence and sub-suppliers at Mongstad supply base. In total, over 50 companies are active at the base.
Since December 2016, Mongstad Group has also been established at the Dusavik port outside Stavanger when a portfolio of infrastructure properties was acquired in several stages to obtain a foothold position at a key supply base serving the Central North Sea.
Dusavik is selected by Statoil to service the Johan Sverdrup development, the largest oil field development on the Norwegian Continental Shelf, with expected production start in 2019 (longevity estimated beyond 2060).
Market trends and drivers
Offshore O&G activity generates a continuous need for supply of goods, equipment and people in order to maintain an uninterrupted production. The supply base acts as the landside hub for every operation, in many cases coordinating the flow of supply. Examples of onshore need for storage includes spares and equipment, casing, drill pipes, bulk storage and goods related to the various subcontractors.
While the broader O&G industry has been under pressure from the oil price decline, Mongstad Group has experienced strong activity growth and delivered several accretive capex projects for its tenants. As logistics costs are a significant part of operating costs for operators of offshore installations, there has been an increased focus on optimizing sailing routes and supply base operations. This trend is expected to continue and adapted infrastructure is an enabler. The fields served from Mongstad Group are producing fields, and as such, the activity at the base has a limited exposure to more volatile exploration activities but is rather stable for the remainder of field life-times. The outlook for key trends affecting Mongstad Group is stable and moderately positive in the medium-term.
The investment rationale in Mongstad Group is based on high barriers of entry, a strong market position in combination with a stable and growing business based on long-term contracts with CPI adjustments as well as good potential for further expansion to other active bases on the Norwegian Continental Shelf.
The business plan includes continued development of Mongstad and Dusavik, and potential acquisitions of infrastructure at other supply bases or other infrastructure assets with similar characteristics, for instance long-term contracts with solid counter-parties.