Shell takes over operatorship, makes FID to develop Arran field

Oil major Shell has taken over operatorship of the Arran field in the UK North Sea and made the final investment decision (FID) to develop the field.

Arran is a gas condensate field located in the central North Sea approximately 240 km east of Aberdeen and approximately 3 km from the United Kingdom (UK)/Norway median line.

Shell’s partner on the project, the London-listed RockRose, said on Wednesday that the FID had been made by the joint venture partners to develop the Arran field and that Shell had taken over the operator role. Dyas UK is also a partner in the project. It is worth reminding that RockRose earlier in October completed the acquisition of Dyas B.V., a subsidiary of a family-owned Dutch company SHV Holdings N.V.

RockRose entered the Arran field through an agreement with Dana Petroleum, which was made in August 2018. RockRose agreed to buy Dana’s 20.43% interest in blocks 23/11a, 23/16b and 23/16c, which contain the Arran field. The company also signed an Equity Realignment Letter Agreement on Arran that took its interest to 30.43%.

RockRose also said on Wednesday that the acquisition of Dana’s interest in the field had been completed.

At peak production, Arran is expected to produce around 100 million standard cubic feet a day of gas and 4,000 barrels per day of condensate, which combined equates to 21,000 barrels of oil equivalent per day (gross).

Four new development wells will be drilled and the natural gas and liquids they produce will be transported via a newly installed subsea pipeline to the Shell-operated Shearwater platform.

RockRose said in August that the Field Development Plan (FDP) would be filed with the OGA by the end of September 2018.

Andrew Austin, Executive Chairman of RockRose Energy said: “The completion of the Arran acquisition and investment decision by the partners is a major milestone for RockRose as the first development project the Company has participated in. The exploitation of infill drilling opportunities continues as part of our portfolio’s evolution. All activity, including infill drilling, development projects and decommissioning is funded from cash flow.”

Dr Andy Samuel, Chief Executive of the Oil and Gas Authority welcomed Shell’s announcement to invest in the Arran field.

He said: “The OGA is very pleased with the decision by Shell and partners, Rockrose and Dyas, to proceed with investment in the Arran field development. Great credit to the new operator and partnership for showing real adaptability and tenacity to drive this project forward for what is Shell’s fourth field development approval this year.

“The Arran field has been on our radar for quite some time as a key component of our Central Graben Area Plan – which takes an area approach to maximizing the considerable value across that part of the Central North Sea. Shell’s Fram development, which we approved earlier this year, is another part of our Central Graben Area Plan.

“I look forward to the other elements of this plan, including another operator and field development, coming to fruition in the near future.”

Up to six more FIDs by year-end 

Commenting on Shell’s decision to go ahead with the Arran development, in the UK Central North Sea, Lucy King, research analyst at Wood Mackenzie, said: “Shell’s FID for Arran is the 11th FID for the UK North Sea this year.

“In total, around £3 billion ($3.9 billion) in development capex has been committed to so far. We can expect up to six more FIDs before the end of the year.”

King added: “Sanctioning this at a time when development costs are lower results in a low breakeven, quick payback and provides a boost to the strategically important Shearwater hub and wider Central North Sea area. The OGA will be pleased.

“Both operatorship and partnership has been re-shuffled to drive this project forward – a good case study of assets in the right hands in action.”

Arran is set to tie into the Shearwater hub and the move reduces risk with the development and consolidates Shell’s position within the Shearwater area.

King said: “This reaffirms Shell’s commitment to the North Sea – this is its fourth FID in the UK this year following Penguins, Alligin and Fram.

“Confirmation of Zennor’s exit is not unexpected – they are 100% in Finlaggan which is due FID by the end of the year. And they recently acquired interest in Britannia, which Finlaggan will tie-in to, so their focus is obviously elsewhere.

“We could now see Serica Energy FID Columbus before the end of the year. Columbus will tie into the Arran to Shearwater pipeline and is contingent on Arran reaching key development milestones.”

Offshore Energy Today Staff