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Shell outlines projects on track for FIDs

Friday, Aug 04, 2017

European upstream projects in the UK and Italy are among the eight Royal Dutch Shell proposals scheduled for a final investment decision (FID) before 2018.

Shell is considering a redevelopment of the Penguins cluster in the northern North Sea. This would see the installation of a new FPSO to replace the current 65-km tie-back of Penguins’ five deposits to the ageing Brent Charlie platform.

Charlie is the only one of four Brent platforms that is still producing oil, and Penguins requires a new outlet for processing once the field is finally decommissioned.

The new cylindrical FPSO is anticipated to help Penguin reach peak output of 40,000 boepd gross from a combination of gas-oil and gas-condensate accumulations.

Shell holds a 50% stake in the Penguins project, which is reportedly being geared towards launch for 2020 or later, though the cluster’s profitability has been questioned during previous down cycles.

Also included in the list is Shell’s 39% stake in a second phase expansion for the Eni-operated Val D’Agri oilfield onshore Italy.

Val D’Agri is responsible for 40% of Eni’s Italian crude output, but only restarted production in December 2016 after being unceremoniously closed while prosecutors investigated illicit waste disposal allegations.

Prior to the shutdown, the project yielded around 75,000 bpd of oil plus 4.6 mcm per day of gas. Output at peak in the second phase is anticipated to yield 60,000 boepd in total.

The disclosures were made in a briefing on Shell’s second-quarter results on July 27, where the Anglo-Dutch firm reported a US$1.55 billion net profit, up from US$1.18 billion in the same period last year.

Shell told investors it was close to covering the aftermath of its GBP35 billion (US$46.28 billion) purchase of BG Group at the height of the industry depression in February 2016.

A US$30 billion divestment programme was launched to offset debt from the takeover, with Shell reporting that it has now achieved US$15 billion worth of sell-offs.

Another US$7 billion has been agreed in principle for assets such as the Corrib gas field in Ireland, which will be sold to a unit of the Canadian Pension Plan Investment Board (CPPIB) for up to US$1.23 billion in a deal announced July 12. But Shell must also weigh the need for fresh production capacity to capture upside once the global supply situation eases.

It aims to generate additional cash flow of US$10 billion from new or recently launched projects by 2018, contingent on Brent averaging US$50 and US$60 in 2017 and 2018 respectively.

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