Royal Dutch Shell announced on January 15 a final investment decision on the redevelopment of the Penguins oil and gas field in the UK North Sea. Meanwhile,
Reuters has reported that Iraq has approved the sale by Shell of the company’s 20% stake in Iraq’s West Qurna 1 oilfield to Japan’s Itochu Corp.
Shell said in a press release that the decision on January 15 to redevelop the North Sea field authorises the construction of a floating production, storage and offloading (FPSO) vessel, the first new manned installation for Shell in the northern North Sea in almost 30 years.
The redevelopment is an attractive opportunity with a competitive go-forward break-even price below $40 per barrel. The FPSO is expected to have a peak production (100%) of circa 45,000 barrels of oil equivalent per day.
“Penguins demonstrates the importance of Shell’s North Sea assets to the company’s upstream portfolio,” Shell Upstream Director Andy Brown said. “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.”
The Penguins field currently processes oil and gas using four existing drill centres tied back to the Brent Charlie platform. The redevelopment of the field, required when Brent Charlie ceases production will see an additional eight wells drilled, which will be tied back to the new FPSO vessel. Natural gas will be exported through the tie-in of existing subsea facilities and additional pipeline infrastructure.
Steve Phimister, Vice President for Upstream in the UK and Ireland said: “Shell has had a strong presence in this part of the northern North Sea for more than forty years. Having reshaped our portfolio over the last twelve months, we now plan to grow our North Sea production through our core production assets. In doing so, we will continue to work with the UK government, our partners and the regulator to maximise the economic recovery in one of Shell’s heartlands.”
The Penguins field is in 165 metres (541 feet) of water, approximately 150 miles north east of the Shetland Islands. Discovered in 1974, the field was first developed in 2002 and is a joint venture between Shell (50% and operator) and ExxonMobil (50%).
According to Shell, a joint venture-owned/Shell-operated Sevan 400 FPSO has been selected as the development option for the field. Oil will be transported via tanker to refineries and gas will be transported via the FLAGS pipeline to the St Fergus gas terminal in northeast Scotland.
Shell quits Iraqi field
Meanwhile, Shell is giving up on its last oil fields in Iraq. Reuters quoted an Iraqi official as saying that Shell sold its stake in West Qurna 1 to Itochu and the oil ministry approved it. The West Qurna 1 oilfield, operated by Exxon Mobile, currently produces around 405,000 barrels per day.
Shell has said it is still committed to producing gas in Iraq, focusing on developing and expanding the Basra Gas Company, which processes gas from the Rumaila, West Qurna 1 and Zubair fields. It has a 44% stake in the joint venture.