Shell sanctions Penguins field redevelopment. Picks Sevan FPSO for the job

Oil giant Shell has made a final investment decision on the redevelopment of the Penguins oil and gas field in the UK North Sea.

The decision authorizes 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 FPSO is expected to have a peak production (100%) of circa 45,000 boe/d.

Shell said on Monday the redevelopment was an attractive opportunity with a competitive go-forward break-even price below $40 per barrel.

The oil company also informed that global engineering and construction company, Fluor, has been awarded the FPSO engineering, procurement and construction contract. In addition, Sevan Marine will provide the technology for the circular FPSO and will provide technical support during the design phase of the project.

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

The Penguins field currently processes oil and gas using four existing drill centers 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 meters (541 feet) of water, approximately 150 miles northeast 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%).

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 north-east Scotland.

“Vote of confidence”

Andy Samuel, Chief Executive of the Oil and Gas Authority (OGA), has welcomed Shell’s announcement that it has made a final investment decision on the redevelopment of the Penguins oil and gas field.

Samuel said: “It’s a vote of confidence from two major global operators, Shell and Esso, in realizing the significant remaining potential of an existing asset. We are expecting further high value projects to move forward to sanction this year which will help prolong UK production for many years.

“The project also marks the first time that the OGA Supply Chain Action Plans will be used as part of the field development approval process ensuring collaboration through the Supply Chain to maximize value for both operator and service companies.”

Penguins redevelopment was also welcomed by trade body Oil & Gas UK.

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.

“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.”

Offshore Energy Today Staff