SHELL will redevelop the Penguins oil and gas field 240 km northeast of the Shetland Islands, a project that will see its first new manned installation in the northern North Sea in almost 30 years.
The project, a joint venture with ExxonMobil, involves construction of a floating production, storage and offloading (FPSO) vessel. The field was originally developed in 2002 and currently processes oil and gas using four drill centres tied back to Brent Charlie. Redevelopment of the field, required for when Brent Charlie ceases production, will see an additional eight wells drilled, which will be tied back to the new FPSO vessel.
The Financial Times reports that the project is expected to cost more than US$1bn and marks one of the largest investments in the North Sea since oil prices slumped in 2014 from US$115/bbl. The mature region’s relatively high operational costs forced producers to embark on a severe cost-cutting exercise and shed tens of thousands of jobs.
The redevelopment has a breakeven price below US$40/bbl. Crude prices are currently at a three-year high of around US$70/bbl.
Shell’s choice to invest is expected to raise confidence in the mature region, especially following its decision last year to sell assets that produced more than half of its North Sea oil output.
“Having reshaped our portfolio over the last 12 months, we now plan to grow our North Sea production through our core production assets,” said Steve Phimister, vice president for upstream in the UK and Ireland.
“Penguins demonstrates the importance of Shell’s North Sea assets to the company’s upstream portfolio,” added Andy Brown, upstream director.
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