Shell Goes for More UK Penguins
Shell Expro – the Anglo-Dutch major's 50-50 UK North Sea upstream joint venture with ExxonMobil – has taken the final investment decision to redevelop the Penguins oil and gas field. The decision authorises the construction of a floating production, storage and offloading (FPSO) vessel, the first new manned installation for Shell in the northern North Sea in almost 30 years, it said January 15.
It described the redevelopment 150 miles northeast of the Shetland Islands as "an attractive opportunity with a competitive go-forward break-even price below $40/barrel," but did not say that the higher oil price in the last six months had triggered the decision that the industry had been expecting for some time. Since reorganising after its purchase of BG, the company has had to re-evaluate all its plans to decide which were worth pursuing as it aims to be a world-class investment, it told NGW. The FPSO is expected to have a peak production (100%) of circa 45,000 boe/d but the company would not break this down into oil and gas when NGW asked.
Penguins field currently processes oil and gas using four existing drill centres tied back to the Brent Charlie platform. 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.
Shell said the UK northern North Sea had long been a core part of its areas of activity and "having reshaped our portfolio over the last twelve months, we now plan to grow our North Sea production through our core production assets. In doing so, we will continue to work with the UK government, our partners and the regulator to maximise the economic recovery in one of Shell’s heartlands.”
Discovered 1974, Penguins was first developed in 2002. A joint venture-owned/Shell-operated Sevan 400 FPSO has been selected as the development option for the field. Gas will go through the Flags pipeline to the St Fergus gas terminal. Shell added that, whereas Norway-based Sevan Marine will provide the technology (under license agreement) for the circular FPSO plus technical support during the project's design phase, it had awarded US engineering group Fluor the FPSO engineering, procurement and construction contract.
Sevan Marine noted that this will be the 6th Sevan Marine-designed cylindrical FPSO to be built. It will receive an initial milestone payment, plus further payments subject to three future milestones.
"Together with the recent start-up of the Dana Petroleum-operated Western Isles FPSO in the UK and cost reductions taken, we have come a long way in turning around Sevan Marine. We look forward to fully supporting the construction of the Penguins FPSO while further developing the Sevan Marine concept and winning new projects." says Sevan Marine CEO Reese McNeel.
"This is the largest FID since Culzean in August 2015 and shows market confidence has returned. We are expecting up 14 UK final investment decisions in 2018, Penguins is the second largest by reserves," noted consultancy Wood Mackenzie's senior research analyst Fiona Legate later January 15.