The Royal Dutch/Shell group strongly reaffirmed its long-term commitment to the maturing UK North Sea fields yesterday, saying there was at least 50% more oil and gas to be produced. Shell’s chief executive of European exploration and production, Tom Botts, said the company didn’t have any plans to abandon the North Sea reserves for at least 9-10 more years. “Ten years from now, the UK will still be a valuable part of our energy portfolio and we don’t have an exit strategy for the UK,” he said.
European oil and gas production was now 1.2 million barrels of oil equivalent a day, a level Shell believes can be held for the next 9-10 years. “We must be more factual about what crude is left in the North Sea,” Botts said at the opening ceremony of the Goldeneye gas project in the North Sea.
“The idea that everybody wants to leave the North Sea and turn off the lights is wrong. There’s at least as much crude left in the UK (Continental Shelf) as has already been produced. It comes in smaller packages and at a higher cost to develop, but these are challenges that Shell is trying to take on.”
Shell’s equity holdings in the UK North Sea accounts for 500,000 boe/d and Europe is about one-third of Shell’s global oil and gas production portfolio.
Shell will keep its production levels up by expanding to fields next to existing operations, said Kieron McFadyen, technical director of Shell exploration and production.
Shell will also look at deepwater fields on the margins of the North Sea and Atlantic stretching from the North Norwegian Sea through the Shetland Isles to west Ireland. Shell just boosted its UK holdings, by picking up another eight North Sea blocks in the last licence round. It is also developing the Ormen Lange and Corrib Island gas fields in off Norway and Ireland respectively.
Shell’s commitment to the UK Continental Shelf (UKCS) comes amid evidence of an accelerating decline in oil and gas volumes. Combined oil and gas production was 3.17 million barrels a day in August, according to the most recent data available. This represents a decline of 11% from July and a fall of almost 10% from August 2003, said the Royal Bank of Scotland in a monthly survey.
Once dominated by Shell and rival BP, the UKCS has transformed itself over the past decade. Junior oil companies, particularly from Canada and the US, have become big investors in the basin, attracted by steady asset divestments, a relatively stable tax regime and a favourable government investment policy.