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Released September 15, 2017 | GALWAY, IRELAND
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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--BP plc (NYSE:BP) (London, England) and Royal Dutch Shell plc (NYSE:RDS-A) (The Hague, Netherlands) have committed to future oil and gas exploration in the North Sea despite depleting resources.
The companies were speaking at the Offshore Europe conference in Aberdeen, Scotland, hub for many of the big oil and gas exploration operators and refiners. Both BP and Shell reaffirmed their commitment to the region despite both selling off assets in the region in recent years. Shell sold more than half of its U.K. North Sea production capacity to Chrysaor at the start of the year for $3.8 billion. Both companies cited new discoveries, lower costs of production and technological advances as key reasons why exploration has been re-invigorated in the North Sea.
"[In the 1980s] Aberdeen was the new frontier, showing the world how to explore and operate in some of the harshest conditions anywhere on the planet," said Bob Dudley, BP chief executive officer. "It's where many of the great innovations of the offshore industry began. Skills learned here have shaped the industry all around the globe. It's why the North Sea will always be one of the great basins. That continues to be the case and we're now seeing a renewed focus in the basin. I'm really pleased about that. We've seen Hurricane Energy's big discovery earlier this year--opening the prospect of major new resources west of Shetland and Total's (NYSE:TOT) new commitment, with the acquisition of Maersk Oil."
He added: "For some areas of the business, simple standardisation could be transformational -- and this focus on standardisation, simplification and discipline on cost has contributed to our average production costs in the North Sea coming down from a peak of over $30 a barrel in 2014, to less than $15 a barrel today. Heading towards 2020, with all our major new developments coming into production, we expect that to come down below $12 a barrel in the North Sea."
Dudley admitted that times have been hard over the past decade in the North Sea. "It has been a tough time, no question about that. Tough for many people in the industry in this region. Tough on their families. But in this tough environment, we see the North Sea turning things around. Costs are coming down and oil production is back up. There is plenty of life left in the basin, but it has never been a basin of easy barrels--even less so today after 5 billion barrels of production. We have to be highly competitive, cost-efficient and disciplined, and then a step beyond that."
Shell's Chief Executive Officer Ben van Beurden defended its commitment despite recent actions.
"As a Dutchman, speaking English, in Scotland, I am determined to be very clear today. I don't want any misunderstandings. Because you have seen headlines too about Shell divesting $3.8 billion worth of North Sea assets to Chrysaor. About the company removing the topside of Brent Delta in the most visible sign of decommissioning to date. And there have been headlines as Shell, like everybody else, has had to cut costs in response to the sustained low oil price. So, is Shell still committed to the U.K.? I want to be clear. Yes it is."
"Shell has clearly stated its intention to be a world-class investment case, and the North Sea is part of the drive to achieve that goal. That is why the company intends to invest hundreds of millions of dollars a year in the area over the coming years."
Last month Industrial Info reported on BP's record levels of investment in new exploration, including for the North Sea. One of its largest projects is the umbrella Quad 204 oilfield redevelopment in the North Sea valued at $5.7 billion. Centred on the existing Schiehallion and Loyal oil and gas fields, construction is underway on the $130 million second phase of the Schiehallion Oil & Natural Gas Offshore Field Redevelopment Project in Quad 204. Twelve more wells are expected to be drilled to explore an area with an estimated 600 million barrels of recoverable oil. BP also is planning a $135 million third phase for Schiehallon, which would add another 12 or 13 wells. For more information, see Industrial Info's reports on Phase II and Phase III of the Schiehallion project. For additional information, see August 2, 2017, article - BP Readies for Record Oil & Gas Project Launches, Holds Steady on Capital Spending.
Despite the commitment of both CEOs, Shell's van Beurden cautioned that the North Sea must remain competitive.
"The basin still needs to earn its right to grow," he said. "It is competing internationally for investment from across the industry. It can, and must, be attractive for that investment on an international basis. For these are challenging times. The oil price has already been lower for longer than our industry would like. And the global energy transition inevitably means the emergence of new sources of energy, new patterns of consumer behaviour and new challenges for the oil and gas industry."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Our European headquarters are located in Galway, Ireland. Follow IIR Europe on: Facebook - Twitter - LinkedIn For more information on our European coverage send inquiries to info@industrialinfo.eu or visit us online at Industrial Info Europe.
The companies were speaking at the Offshore Europe conference in Aberdeen, Scotland, hub for many of the big oil and gas exploration operators and refiners. Both BP and Shell reaffirmed their commitment to the region despite both selling off assets in the region in recent years. Shell sold more than half of its U.K. North Sea production capacity to Chrysaor at the start of the year for $3.8 billion. Both companies cited new discoveries, lower costs of production and technological advances as key reasons why exploration has been re-invigorated in the North Sea.
"[In the 1980s] Aberdeen was the new frontier, showing the world how to explore and operate in some of the harshest conditions anywhere on the planet," said Bob Dudley, BP chief executive officer. "It's where many of the great innovations of the offshore industry began. Skills learned here have shaped the industry all around the globe. It's why the North Sea will always be one of the great basins. That continues to be the case and we're now seeing a renewed focus in the basin. I'm really pleased about that. We've seen Hurricane Energy's big discovery earlier this year--opening the prospect of major new resources west of Shetland and Total's (NYSE:TOT) new commitment, with the acquisition of Maersk Oil."
He added: "For some areas of the business, simple standardisation could be transformational -- and this focus on standardisation, simplification and discipline on cost has contributed to our average production costs in the North Sea coming down from a peak of over $30 a barrel in 2014, to less than $15 a barrel today. Heading towards 2020, with all our major new developments coming into production, we expect that to come down below $12 a barrel in the North Sea."
Dudley admitted that times have been hard over the past decade in the North Sea. "It has been a tough time, no question about that. Tough for many people in the industry in this region. Tough on their families. But in this tough environment, we see the North Sea turning things around. Costs are coming down and oil production is back up. There is plenty of life left in the basin, but it has never been a basin of easy barrels--even less so today after 5 billion barrels of production. We have to be highly competitive, cost-efficient and disciplined, and then a step beyond that."
Shell's Chief Executive Officer Ben van Beurden defended its commitment despite recent actions.
"As a Dutchman, speaking English, in Scotland, I am determined to be very clear today. I don't want any misunderstandings. Because you have seen headlines too about Shell divesting $3.8 billion worth of North Sea assets to Chrysaor. About the company removing the topside of Brent Delta in the most visible sign of decommissioning to date. And there have been headlines as Shell, like everybody else, has had to cut costs in response to the sustained low oil price. So, is Shell still committed to the U.K.? I want to be clear. Yes it is."
"Shell has clearly stated its intention to be a world-class investment case, and the North Sea is part of the drive to achieve that goal. That is why the company intends to invest hundreds of millions of dollars a year in the area over the coming years."
Last month Industrial Info reported on BP's record levels of investment in new exploration, including for the North Sea. One of its largest projects is the umbrella Quad 204 oilfield redevelopment in the North Sea valued at $5.7 billion. Centred on the existing Schiehallion and Loyal oil and gas fields, construction is underway on the $130 million second phase of the Schiehallion Oil & Natural Gas Offshore Field Redevelopment Project in Quad 204. Twelve more wells are expected to be drilled to explore an area with an estimated 600 million barrels of recoverable oil. BP also is planning a $135 million third phase for Schiehallon, which would add another 12 or 13 wells. For more information, see Industrial Info's reports on Phase II and Phase III of the Schiehallion project. For additional information, see August 2, 2017, article - BP Readies for Record Oil & Gas Project Launches, Holds Steady on Capital Spending.
Despite the commitment of both CEOs, Shell's van Beurden cautioned that the North Sea must remain competitive.
"The basin still needs to earn its right to grow," he said. "It is competing internationally for investment from across the industry. It can, and must, be attractive for that investment on an international basis. For these are challenging times. The oil price has already been lower for longer than our industry would like. And the global energy transition inevitably means the emergence of new sources of energy, new patterns of consumer behaviour and new challenges for the oil and gas industry."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Our European headquarters are located in Galway, Ireland. Follow IIR Europe on: Facebook - Twitter - LinkedIn For more information on our European coverage send inquiries to info@industrialinfo.eu or visit us online at Industrial Info Europe.
