Shell to build first new North Sea installation in 30 years

The new installation will operate in the Penguins field, 150 miles north-east of the Shetland islands.  Picture: Andy Buchanan
The new installation will operate in the Penguins field, 150 miles north-east of the Shetland islands. Picture: Andy Buchanan
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Energy giant Shell is to develop its first new manned installation in the northern part of the North Sea for almost 30 years.

The Scottish Government and industry body Oil and Gas UK welcomed the company’s confirmation it is to construct a floating production, storage and offloading (FPSO) vessel which will begin drilling in the Penguins oil and gas field.

The oil field - 150 miles north-east of the Shetland Islands - was discovered in 1974 before being developed in 2002 and is a joint venture between Shell and ExxonMobil.

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The Penguins field currently processes oil and gas using four existing drill centres and its redevelopment will see an additional eight wells drilled.

Describing the plan as an “attractive opportunity”, Shell said it is expected to have a peak production of about 45,000 barrels of oil per day.

Discovered in 1974, the field was first developed in 2002 and is a 50 per cent joint venture between Shell and ExxonMobil.

The news comes amid a resurgence in oil prices which has seen Brent touch 70 US dollars (£50) a barrel - although Shell stated the project would have a break-even point of less than 40 US dollars (£28) per barrel.

Andy Brown, of Shell, said: “Penguins demonstrates the importance of Shell’s North Sea assets to the company’s upstream portfolio.

“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.”

Energy minister Paul Wheelhouse said the news was a “hugely positive announcement “ for both the Penguins field and the “future of North Sea oil”.

He stated: “This significant investment by Shell and ExxonMobil is further evidence of rising confidence in the future of the region and it will offer a significant boost to communities across the north-east of Scotland, along with boosting the wider Scottish economy.

“We have always maintained there are significant opportunities remaining in the North Sea, even in the context of a low carbon transition, and that a strong and vibrant domestic offshore oil and gas industry will play an essential role in the future energy system we set out in our recently published energy strategy.

“Our work to date to support the sector is seeing us invest £90 million in the Oil and Gas Technology Centre, and through further funding for research, innovation and skills development for the sector means that Scotland is now very well-placed to capitalise on this investment domestically and in export markets, with opportunities for workers and businesses throughout Scotland’s oil and gas supply chain.”

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Deirdre Michie, chief executive of Oil & Gas UK, said: “This is great news and an exciting start to the new year.

“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.”

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