Shell restarts North Sea Pierce field

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SHELL has restarted operations at the Pierce field, following an upgrade to allow gas to be produced after years of the field producing only oil. 

Located 265 km east of Aberdeen, Scotland in the UK Central North Sea, Pierce is a joint venture between Shell, and Ithaca Energy (UK). The field was discovered in 1975, with first oil achieved in February 1999.  

The field is developed by subsea wells tied into the Haewene Brim floating production, storage and offloading (FPSO) vessel.  

Since late 2021, the FPSO, which is owned and operated by Bluewater, has undergone a significant redevelopment to enable it to produce gas that had previously been re-injected into the reservoir. 

With the project now complete, peak production is expected to reach 30,000 boe/d, which is more than twice the production prior to the redevelopment, with more gas being produced than oil, Shell said. 

The gas will be sent through newly installed subsea pipelines and the oil will be transported by tanker, as before. 

A new subsea gas export line was also installed, connecting to the Shell Esso Gas and Associated Liquids (SEGAL) pipeline system. Set up as a joint venture between Shell and Esso with Shell as the operator, the SEGAL system is made up of two wet gas transportation pipelines, the St. Fergus gas terminal, Fife NGL terminal and Braefoot Bay tanker loading facility.  

Shell said the redevelopment of the Pierce field is part of its broader plan to invest £20-25bn (US$25-31bn) in the UK energy system in the next decade, subject to board approval and a stable investment climate. Of this, 75% will be focused on the development of low and zero-carbon products and services.  

Some of the projects Shell plans to develop are the Jackdaw gas field in the UK North Sea, a floating offshore wind farm in Scotland which could bring clean energy to power the equivalent of 6m homes, and growing the UK’s electric vehicle charging infrastructure by aiming to have 100,000 public EV charge points across the country by 2030. 

However, the firm said that projects “must remain economically viable under the recently revised UK tax regime,” for this significant investment to be delivered. 

Windfalls

Currently, oil and gas firms pay a 40% headline rate tax on profits consisting of 30% ring fenced corporation tax and 10% supplementary charge. 

But there are a number of ways to reduce the amount of tax paid, and in recent years, under the existing regime, fewer than 35 groups have made tax payments each year. 

For instance, Shell and BP both received more money back from the UK government than they paid every year from 2015 to 2020, except in 2017, when Shell paid more than it received. Furthermore, between 2018 and 2020, the two firms paid shareholders more than £44bn in dividends. 

Shell and BP also faced a wave of criticism from consumers struggling with the cost of living crisis when last year, Shell reported profits of £32.2bn in 2022, the highest in its 115-year history, while BP’s profits more than doubled to £23bn. 

Fuelled by these huge profits made by the oil and gas sector, last year, the then chancellor Rishi Sunak introduced a 25% Energy Profits Levy to recoup money and help households with crippling energy bills from record high oil and gas prices. 

The levy, which applies to profits made from extracting UK oil and gas, but not from other activities – such as refining oil and selling petrol and diesel on forecourts, also includes an 80% investment relief that means businesses will overall get a 91p tax saving for every £1 they invest. This will provide firms “with an additional, immediate incentive to invest,” the government said.  

The levy was due to expire by 31 December 2025 but was then extended to 2028 and increased to 35% by the UK chancellor Jeremy Hunt in his Autumn 2022 Statement.  

Despite saying it did not expect to pay any windfall tax for 2022, Shell announced that it would pay £108m for 2022. BP on the other hand said it would pay £583m. 

Some firms have voiced disapproval over the changes to the windfall tax, such as French oil company TotalEnergies which said it would cut its planned 2023 investment in the North Sea by a quarter as a result of the levy extension. Harbour Energy, one of the UK’s biggest oil and gas producers, has told staff it plans to cut jobs in response to the 10% increase in the levy.