Shell Looking for More from UK North Sea

There is still a lot more oil and gas to come from the UK North Sea, but extracting it will require a helping hand, the Anglo-Dutch major Shell told the Offshore Europe conference in Aberdeen September 5.

The UK is competing internationally for investment from across the industry. "It can, and must, be attractive for that investment on an international basis," said CEO Ben van Beurden. "These are challenging times. The oil price has already been lower for longer than our industry would like. And the global energy transition inevitably means the emergence of new sources of energy, new patterns of consumer behaviour and new challenges for the oil and gas industry," he said. 

Conceding that "there have been great efforts to advance the UK investment climate and to provide stable foundations for that investment," he said it was nevertheless true that "the work is not done. The basin still needs to earn its right to grow."

There believed to be as many as 20bn barrels of oil equivalent still remaining and there are promising areas yet to be fully explored with the potential to add £290bn to the UK economy by 2035, and he said that Total's planned $7.45bn acquisition of Maersk Oil "with its substantial North Sea assets, only highlights the significant potential that still exists here."

Shell has clearly stated its intention to be a world-class investment case, and the North Sea is part of the drive to achieve that goal, despite the sale of $3.8bn worth of North Sea assets to Chrysaor, cost-cutting and the start of decommissioning Brent Delta.

He said Shell's UK supply chain is worth £3.4bn/yr and the company plans to spend hundreds of millions of dollars a year in the area over the coming years, as it has to maximise the economic recovery from the UK Continental Shelf. 

Shell is not alone in hoping for some help: while assets worth almost £6bn ($7.8bn) in the region have been sold this year, exploration drilling and field approvals remain low, presenting a poor outlook for the economy. The offshore industry lobby group Oil & Gas UK will publish its annual economic report September 6.

Consultancy Wood Mackenzie said in Aberdeen, September 4, that of the UK's 3 billion barrels of oil equivalent (boe) of technically recoverable stranded oil and gas resources, as much as half -- or 1.5 billion boe -  is potentially economic at around $50/boe. But it said that developing the resources would require $18bn of development capex, yet have the potential to generate only $10bn in value to partners, suggesting it too thinks tax breaks are needed.

William Powell