Friday 8 September 2017

The head of Shell’s North Sea business believes early 2018 will be the “right time” for the Anglo-Dutch supermajor to take a final investment decision on the redevelopment of its Penguins field in the UK northern North Sea.

Giving an upbeat assessment of progress on the project, Steve Phimister, vice president of Shell UK & Ireland, stated he hopes Shell and its 50% partner ExxonMobil will be in a position to sanction the project early next year after work to make the scheme more cost-effective.

Assuming it gets the go-ahead, the project is set to involve the installation of a newbuild Sevan Marine-design cylindrical floating production, storage and offloading vessel.

However, the executive cautioned that the project was not yet over the line, and that both Shell’s and ExxonMobil’s group investment committees still need to agree to give the go-ahead before an FID can be taken.

“I think the development concept on the table is as good as it is going to get. I am really pleased with how the supply chain has worked together with Shell and ExxonMobil to make this an investible proposition,” Phimister said.

“It is the most economic of all the options that we have looked at. I would like to think now is the moment to strike. The project has come a very, very long way in the last year or two.

“It’s a project I am very keen on investing in and getting off the ground.”

Phimister said that the next step would see the two partners take the proposals to “their investment committees in their headquarters”.

“It is now a question for Shell and ExxonMobil to have that conversation with their headquarters and getting the funds to invest in the project,” he said.

Phimister said that work carried out in the last year has put the project “square in the investible category”.

He said costs had been brought down to below $40 per barrel now, which he said was a “very clear criteria and metric set for us by the Shell group”.

“It wasn’t below $40 12 months ago, but it is now. Some great work has been done by the team and the supply chain working with us and collaborating with us to find a solution,” he said.

Asked if he felt the project fitted ExxonMobil’s investment criteria, he said: “You would have to ask that question of ExxonMobil. I wouldn’t like to speak for them. I think so, I hope so.”

Penguins has been producing since 2003 as a 65-kilometre ­subsea tie-back to the Brent Charlie platform.

But with Brent C expected to cease output before 2020, Shell has been examining alternatives to extend the life of Penguins.

Phimister said a number of development options have been looked at, including continuing to run production over its current host Brent Charlie, but with that platform likely to cease production before 2020 that was not “seen as a viable option”.

“If you think about longevity I don’t see that as the answer. We think the best economic proposition is the floater.

“We have looked at other options as well, other hosts, but for us clearly the most economic is to run Penguins over Charlie until Charlie [ceases production] then redevelop [it] through the floating solution, which is now a competitive proposition.”

“We are now closing out those other options to make sure that is the right choice.”

Penguins holds about 100 million barrels, which “in the North Sea scheme of things is not an immaterial development”, Phimister said.

Shell has also carried out seismic surveys over the area and is looking at the potential of tying back smaller nearby accumulations over the floater if it goes ahead.

“We will continue to look for other prospectivity around there. They will be small pools, let me be clear.”

The Penguins cluster is located in blocks 211/13a and 211/14, about 150 kilometres east of the Shetland Islands, and has been producing since 2003 as a 65-kilometre ­subsea tie-back to the Brent Charlie platform.