Shell’s North Sea gas discovery ‘commercially robust’ with FID on the cards for 2027

UK-headquartered energy giant Shell is eyeing a field development plan (FDP) and a final investment decision (FID) in 2027 for its recent natural gas discovery in the North Sea, which is situated on the UK Continental Shelf (UKCS).

Following a positive well investment decision for the Selene exploration well in the P2437 license, Shell opted to move forward with its 2024 work program and budget. The oil major hired a jack-up rig from Valaris for a two-well drilling campaign after geotechnical site investigation works.

The Valaris 123 jack-up rig’s drilling operations at the exploration well 48/8b-3 in the Southern North Sea initially indicated a 160-meter-thick section of Leman Sandstone with gas present throughout. However, the updated post-well structural maps of the Selene prospect point towards a maximum gas column of about 100 meters, based on the data provided by Shell’s partner, Deltic Energy.

According to Deltic, post-well analysis and pre-field development planning work on the Selene gas project is underway, with the joint venture (JV) partners unanimously supporting the move into the second term of the license and committed to the various engineering, commercial, and regulatory workflows required to support the FDP and FID in early 2027.

Moreover, the company claims the work has initially focused on the analysis of data and samples collected from the 2024 well and the integration of this information into the various subsurface and reservoir models, which are said to be progressing well.

As a result, Deltic expects significant amounts of data to become available over the coming months to enhance the understanding of the reservoir and provide a higher degree of confidence about potential future flow rates in a production scenario.

As the legacy 3D seismic dataset over the development area was last reprocessed over a decade ago, the JV is considering upgrading the dataset and utilizing modern processing techniques to improve seismic image quality and refine the structural model up-dip from the discovery well location.

If such a move is made, the work, which will run in parallel to other workflows, will result in reprocessed data being available towards the first quarter of 2026. Deltic’s revised internal economic model for an indicative two-well development of the Selene discovery envisions gas export via the existing Barque production infrastructure.

“The company’s sensitivity modelling demonstrates that the Selene gas project is a commercially robust development. Gas prices utilised in the model represent a significant discount to both current spot price and long-term forward gas prices indicating the potential for material upside,” explained Deltic.

With the data acquired during the drilling of the Selene exploration well in mind, Deltic has also reviewed the prospectivity associated with the Endymion structure on the northeastern corner of the P2437 license area, which is a structural extension of the depleted Mimas gas field.

Therefore, the firm estimates that the Endymion prospect contains P50 prospective resources of 70 bcf, with a P90-P10 range of 45 to 106 bcf, with a geological chance of success (GCoS) greater than 75%. The Endymion structure is envisaged to be developed via a single subsea tie-back to the proposed Selene development infrastructure.

Deltic claims that any additional gas produced from Endymion could further materially enhance the overall Selene license project economics and maximize the use of the proposed Selene infrastructure for additional years. Any drilling on Endymion is anticipated to only occur after FID on the core Selene development.

Furthermore, the company is currently evaluating several funding options, both at the corporate and asset levels, which should allow it to secure the funding required to meet its medium-term requirements for the Selene development.

Andrew Nunn, Deltic CEO, commented: “The magnitude of the divergence between Deltic’s share price and the company’s valuation of its stake in the Selene gas project is clearly a cause of frustration for both shareholders and the board, especially given the quality of the asset and commitment of the JV partners.

“The board considers that actions taken in late 2024 to reduce ongoing G&A costs, and Deltic’s previously communicated year-end cash position of £1.4m, provides the Board with sufficient flexibility to progress potential funding options to enable the business to move to Selene FID and beyond.”

The options under evaluation include but are not limited to a further farm-down of Deltic’s current equity position in Selene, a partial sale of its interest, a pre-payment against future gas sales, and seeking to add new strategic shareholders to the company’s register.

Nunn added: “There has now been a period of stability in the UK oil and gas industry following the UK Budget in October 2024, and while the overall environment remains extremely challenging, we believe there has been a slight improvement in sentiment towards the sector.

“Deltic, and in particular our Chairman, have been and will continue to provide leadership and input into industry-led initiatives to educate government, ministers and other stakeholders on the environmental, employment, economic, and energy security benefits of producing oil and gas from UK waters.”

The Barque-Clipper-Bacton gathering system and onshore gas processing plant are perceived to have sufficient capacity to accept gas production from the proposed Selene development.

“As recent events have demonstrated, it has never been clearer that a secure domestic energy supply is a vital national asset and Deltic’s work could be a key contributor to delivering that for the UK in the coming years,” concluded Nunn.