Oil majors’ West of Shetland assets to overtake North Sea as major producing basin in UK

Over the last four years oil and gas production in the West of Shetlands has risen and with that, a growing relevance for the biggest players still active in the UK continental shelf (UKCS), says GlobalData, a data and analytics company.

Clair Ridge platforms; Source: BP

The company’s latest research reveals that the West of Shetland (WoS) area retains the attention of major Exploration and Production (E&P) players in the region; however infrastructure restraints could hinder future growth potential in the basin.

Despite the US-based E&P majors, such as Chevron and ConocoPhillips largely divesting out of the UK’s E&P sector of late, their European peers have not followed suit, according to GlobalData.

Of the highly successful 30th UK Offshore Licensing Round held in 2017, approximately 75% of the licensed WoS blocks had European major participation. Moreover, European majors have stakes in 80% of the planned and announced projects in the area compared to approximately 40% in the North Sea.

Daniel Rogers, Upstream Oil and Gas Analyst at GlobalData, commented: “In 2018, Royal Dutch Shell (Shell) and BP Plc (BP)’s hydrocarbon production combined accounted for over half of the WoS total volume. Over recent years both companies have seen North Sea production volumes lose dominance in relation to their UK portfolios. As a result, the WoS is set to overtake the North Sea as Shell’s major producing basin in the UK by 2020, whereas this occurred for BP in 2018”.

The majority of upcoming field developments in the area are oil focused as oil processing capacity at the Sullom Voe terminal is currently around half utilized with expected excess capacity available over the near term. However, the Shetland Gas Plant (SGP), where the areas gas is collected, processed and exported, is currently running at less than 25% spare capacity and newly discovered gas volumes in the basin could push the infrastructure to its limits.

Rogers continued: “Total’s recently discovered Glendronach gas-condensate field is expected to add over 200 million cubic feet per day (mmcfd) of gas supply to the SGP at its peak and could commence production as early as 2021. This, in addition to gas volumes coming from the Cambo and Rosebank oil field developments could further strain the existing infrastructure.

“Operators looking to develop new gas fields in the WoS through the mid-2020s could be challenged by the areas capacity restraints. The investments required for facility expansions may impact project returns and force operators away from marginal gas developments.”

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Equinor rethinking Rosebank plan

Norwegian oil and gas company Equinor has decided to revise the original development plan for the Rosebank project located west of Shetland, which was previously operated by Chevron.

Equinor’s UK assets; Source: Equinor

Following an announcement of the transaction in October 2018, Equinor closed the deal to buy Chevron’s 40% interest in the Rosebank field in the west of Shetland region of the UK Continental Shelf last January and became its operator.

A spokesperson for Equinor told Offshore Energy Today that Equinor is now “taking some time for a detailed assessment of the current concept, seeking to leverage experience from our next generation portfolio and value improvements made to recent project concepts such as Johan Castberg.”

Equinor’s Johan Castberg project, located in the Barents Sea, is being developed with an FPSO+ production vessel with additional subsea solutions. Compared with the original solution, costs for this project have been reduced from approximately 100 billion NOK to 50 billion.

Regarding Rosebank license, the spokesperson stated: “Any extension to the current license will be part of ongoing discussions with our partners and the Oil and Gas Authority.”

With the Rosebank deal, Equinor strengthened its portfolio in the UK’s offshore, which also includes the Mariner development, expected to start commercial production during the first half of 2019.

The Rosebank field was discovered in 2004 and lies about 130 km northwest of the Shetland Islands in water depths of approximately 1,110m. Other partners in the field are Suncor Energy (40%) and Siccar Point Energy (20%).

The potentially recoverable volumes at Rosebank are expected to be more than 300 million barrels.

Before Equinor bought Chevron’s stake and took over the operatorship of the field, Chevron planned to develop Rosebank as a subsea development tied back to a floating production, storage and offloading (FPSO) vessel, with natural gas exported via pipeline.

Even before Equinor entered Rosebank, Wood Mackenzie, an energy intelligence group, said that any buyer would need to have very deep pockets to fund the capital cost of development. Namely, WoodMac estimated it to be more than $6 billion in total.

Offshore Energy Today Staff

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New ultra-deep port to unlock Scotland’s decommissioning potential

Dales Voe in Shetland has been identified as the optimal location for an ultra-deepwater port following an extensive feasibility study.

Dales Voe; Photo by: Mike Pennington; Source: Geograph.org.uk – under the CC BY-SA 2.0 license

The Scottish Government said on Monday that Dales Voe, a bay nearby Fora Ness and Noness Head, was selected as a preferred location following a UK-wide feasibility study conducted by Ernst and Young.

The announcement was made on Shetland during UK’s Oil & Gas Authority roundtable event. According to the study, Dales Voe is the optimal and most cost-effective location for decommissioning work.

The Government added in its announcement that an ultra-deepwater port in Scotland was a key program for Government commitments.

Energy Minister Paul Wheelhouse said: “I believe investment in a deepwater port will unlock the potential for Scotland to secure the largest decommissioning contracts that require the largest heavy lift vessels currently in operation in the North Sea.

“A deepwater port in Scotland will bring significant benefits not only for a single location but as a key part of an integrated and networked Scotland wide decommissioning offering, with wider opportunities realized through the supply chain.”

Sandra Laurenson, chief executive of the Lerwick Port Authority, said: “Official identification of Dales Voe in a nation-wide feasibility study as the optimal location for the UK’s ultra-deepwater decommissioning facility is a welcome endorsement of our belief that this is an excellent future opportunity for Shetland.

“Such a development would benefit the country, greatly strengthening capabilities in a highly competitive international market. We look forward to working with the Scottish Government, including Highlands and Islands Enterprise, industry and others on the next steps necessary for such a significant investment to be realized.”

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