Buoyant near-$70-barrel Brent oil price triggers Shell’s first manned North Sea oil production investment since 1980

Shell's Brent oilfield platforms.
Shell’s Brent oilfield platforms.

Global giant Shell oil is to build its first manned North Sea installation in almost 30 years – buoyed by an upturn in the value of benchmark Brent crude oil price to near three-year high at around $70-barrel.

Yesterday, it announced a major redevelopment of the Penguins oil and gas field in Scotland’s North Sea – greenlighting the construction of a floating production, storage and offloading (FPSO) vessel,

Shell bosses said the redevelopment is an ‘attractive opportunity’ with a competitive go-forward break-even production price below $40-barrel.

The FPSO is expected to have a peak production (100%) of circa 45,000 boe/d.

The Penguins field currently processes oil and gas using four existing drill centres tied back to the Brent Charlie platform – the only one still operating in the iconic Brent crude oil field.

Shell said that up to 400 jobs would be required to build the floating production, storage and offloading (FPSO) vessel – and once it is operational, the Penguins field installation should provide around 70 new North Sea oil jobs.

The redevelopment of the field, required when Brent Charlie ceases production will see an additional eight wells drilled, which will be tied back to the new FPSO vessel. Natural gas will be exported through the tie-in of existing subsea facilities and additional pipeline infrastructure.

The Penguins field is in 165 metres (541 feet) of water, approximately 150 miles north east of the Shetland Islands. Discovered in 1974, the field was first developed in 2002 and is a joint venture between Shell (50% and operator) and ExxonMobil (50%).

The Penguins field was first discovered in 1974 and became operational in 2002.

A joint venture-owned/Shell-operated Sevan 400 FPSO has been selected as the development option for the field. Oil will be transported via tanker to refineries and gas will be transported via the FLAGS pipeline to the St Fergus gas terminal in Aiberdeenshire.

Steve Phimister, Shell Vice-President, UK and Ireland, said: “We have had a strong presence in this part of the northern North Sea for more than 40 years.

“Having reshaped our portfolio over the last 12 months, we now plan to grow our North Sea production through our core production assets. In doing so, we will continue to work to maximise the economic recovery in one of Shell’s heartlands.”

However the use of an offshore FPSO means there will be no extra business for Sullom Voe Oil Terminal, recently taken over by EnQuest. Shetland Islands Council’s development committee chairman Alastair Cooper said it was “disappointing, if not surprising” from a local perspective.

Scottish Energy Minister Paul Wheelhouse commented later: “We have always maintained there are significant opportunities remaining in the North Sea, even in the context of a low carbon transition, and that a strong and vibrant domestic offshore oil and gas industry will play an essential role in the future energy system we set out in our recent draft Scottish Energy Strategy.”

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16 Jan 2018

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