Gas uptick for Shell’s North Sea development project

UK-headquartered energy giant Shell has disclosed better porosity and permeability than previously assumed for its natural gas discovery in the North Sea, which is situated on the UK Continental Shelf (UKCS). This led the firm’s partner, Deltic Energy, to reveal a boost in recoverable gas volumes from the project.

After deciding to drill the Selene exploration well in the P2437 license, Shell picked a jack-up rig from Valaris for a two-well drilling campaign after geotechnical site investigation works. As a result, the Valaris 123 jack-up rig began drilling operations at the exploration well 48/8b-3 in the Southern North Sea, which initially indicated a 160-meter-thick section of Leman Sandstone with gas present throughout.

Afterward, the updated post-well structural maps of the Selene prospect pointed toward a maximum gas column of about 100 meters. Following the drilling of the well in 2024, the joint venture (JV) partners unanimously voted to move into the second term of the license and committed to the various engineering, commercial, and regulatory workflows required to support a field development plan (FDP) and a final investment decision (FID) scheduled for early 2027.

Once Shell provided porosity and permeability measurements on 176 core plugs taken from drill core samples over the Leman B-Sand, which is said to be the key producing interval within the much thicker Leman Sandstone package, the core analysis is perceived to indicate significantly better porosity and permeability than previously assumed in Deltic’s P50 volumetric estimates and reservoir modelling.

Therefore, the firm incorporated the improved view of porosity into its static subsurface model and estimates of gas-initially-in-place (GIIP) for the Selene structure, which resulted in improved overall recovery factors, higher initial flow rates, extended plateau production periods, and increased estimates of gas recovered over a 20-year production life. 

Andrew Nunn, Deltic’s CEO, commented:“The six month post discovery checkpoint is always a key stage gate on the path from a gas discovery to a gas development project, and as the technical work gathers momentum we narrow the inherent uncertainties of a new find and get greater clarity on the discovery and its potential. The integration of the core data into the volumetric and economic analysis has led to a significant refinement and improvement in Deltic’s understanding of the Selene asset which continues to impress.

“This updated understanding will be critical as the JV moves forward into project scoping and early project design workflows. The circa 45% increase in the NPV10 of Selene net to Deltic is particularly pleasing, especially within the context of the current market cap of the company. Recent global events have reinforced the case for maximising the benefits from the United Kingdom’s domestic resources.”  

According to Deltic, the analysis of the gas samples collected from the 48/8b-3Z well has proven the presence of a very dry, methane-dominated natural gas with nominal concentrations of contaminants, including CO2 and N2. The firm expects that gas produced from Selene will require minimal processing to reach National Grid entry specifications.

Given the commerciality of the project, the material uplift in recoverable gas volumes, the maturity of the technical analysis, and ongoing pre-development workflows, the economic model for Selene has been updated, but Deltic’s base case development assumptions remain unchanged and incorporate a two-well development with a new normally unmanned installation tied back to existing production infrastructure on the Barque field via a new 20-kilometer subsea pipeline.    

Nunn added: “With continued government support for the development of new fields on existing licences there appears to have been a realisation that, while we continue to consume hydrocarbons as a society, then the focus should be on maximising the proportion of ‘good barrels’ in the energy mix. These barrels are, or will be, produced locally and, in the case of newer developments, from facilities which are specifically designed with a net zero target in mind.

“Hydrocarbons produced in the UK have a lower emissions footprint than imported oil and gas and are operated under the strictest environmental regulations. They also support high quality UK jobs and provide important tax revenues to the Exchequer. We continue to explore various avenues as we work to secure the funding required to maintain our interest in the Selene project as the JV works toward a final investment decision in early 2027.”

Deltic, which has a 25% non-operated interest in the Shell-operated Selene gas discovery in the Southern North Sea (SNS), now estimates gross 2C contingent resources of 174 bcf at Selene, a 33% increase on earlier estimates.

“We believe that it has never been more important for the UK to develop and maximise the benefit of its own resources, like Selene, and thereby maximising the proportion of ‘good barrels’ in the mix as we become increasingly dependent on imported oil and gas,” concluded Nunn.