New exploration discoveries by BP and announcements of further investments by Shell and Spirit have given the North Sea oil and gas industry a great start to 2018. The developments announced in January promise to add millions of barrels of oil and billions of cubic feet of gas production to the UK’s output.
BP’s two discoveries, at its Capercallie site and at the Achmelvich well, which is a joint operation in partnership with Shell and Chevron, have still yet to be fully assessed but the oil giant is hoping they will form part of a large-scale expansion of its North Sea effort. “These are exciting times for BP in the North Sea as we lay the foundations of a refreshed and revitalised business that we expect to double production to 200,000 barrels a day by 2020 and keep producing beyond 2050,” said Mark Thomas, North Sea regional president for BP.
The announcement of the discovery came hot on the heels of a new investment commitment from Spirit Energy, the joint venture between Centrica and Bayerngas Norge, launched in December. The new firm will establish an infill well in the Chiswick field. The development will be the fifth gas well exploiting the field. Fraser Weir, Spirit’s North Sea Director, says that the development, which is hoped will produce 50 billion cubic feet of gas annually, shows the value of the new partnership. “This is just one part of a busy rig programme for Spirit Energy in Europe this year, as we explore for fresh discoveries, maximise the potential of existing fields and plug wells which have ceased production,” Weir said.
Not to be outdone, Shell too announced an expansion of its operation on the UK Continental Shelf, committing to the construction of a new floating production, storage and offloading (FPSO) vessel. The New FSPO, which will serve the Penguins field North East of the Shetland Islands, represents Shells first new manned installation in the North Sea for 30 years.
The Anglo-Dutch giant anticipates peak production of 45,000 barrels a day from the new outfit, and says that it will be profitable even at an oil price of less than $40 dollars a barrel. “Penguins demonstrates the importance of Shell’s North Sea assets to the company’s upstream portfolio,” said Andy Brown, the company’s Upstream Director. “It is another example of how we are unlocking development opportunities, with lower costs, in support of Shell’s transformation into a world class investment case.” Deidre Michie, chief executive of Oil & Gas UK, a trade body, welcomed the news: “A global leader like Shell making a commitment on this scale demonstrates the investment potential the UK Continental Shelf still holds. It also shows the importance of the efficiency improvements our industry has delivered which have helped make redevelopment projects like this commercially attractive,” she said.
After years of plunging oil prices and falling output, things began to look up for the North Sea oil and gas industry in the second half of last year. The impressive start to 2018, seems to herald better still to come. Michie certainly feels so: “We are hopefully entering a more positive phase for our industry in the UK with new projects on the horizon that I hope will bring a much needed boost for companies in the supply chain.”