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The North Sea must ‘earn its right to grow’, says Shell boss

Jillian Ambrose: 

The North Sea still has the support of supermajors BP and Royal Dutch Shell but the basin will need to earn its right to grow within a rapidly changing energy landscape, oil bosses have warned.

Oil industry heavyweights have converged on Aberdeen this week for a conference focused on the future of the North Sea as oil majors shift their portfolios towards low cost oil, petroleum products, gas and even renewables.

Ben Van Beurden, Shell’s chief executive, said the Anglo-Dutch group is still committed to the basin after its $3bn sell-off to private equity backed Chrysaor, but added that the North Sea needs to “earn its right to grow” amid “challenging times” for the oil and gas sector.

The North Sea was hard hit by the recent oil price crash due to higher costs. In the wake of the downturn oil producers in the region will need to adapt to a lower range of oil market prices and slow but steady shift towards lower carbon energy options.

BP boss Bob Dudley told the conference that “renewables are knocking at the door in terms of cost competitiveness”.

“Renewables have long been a part of the portfolio for a lot of international oil companies, and that is expected to grow and diversify as new opportunities come along, particularly for

BP in terms of ‘bio’ for fuels and feedstocks,” he said.

Both the BP boss and Shell chief executive Ben Van Beurden said the shift towards lower carbon options will not rule out oil and gas in the years ahead, but the North Sea must innovate to earn a role within this energy future.

“The world needs renewables. But renewables produce electricity and electricity is less than 20pc of the world’s energy system,” said Mr Van Beurden.

“The world needs battery electric cars. They are on our roads already and we need many more of them. But batteries are not the answer for every road journey, let alone for shipping, freight or air travel,” he added.

“The energy transition to a low carbon future will happen. It has to. But it will take time to happen. It will take generations to happen. And the world still needs oil. It still needs gas,” he said.

Mr Dudley added that the North Sea will continue to have a bright future if it can follow the lead of the US shale industry which has a firm grasp on technological innovation which has helped the sector emerge from the oil market crash.

He said the North Sea will need to do the same in order to do “more with less”, focus on growth areas such as gas, fuels and lubricants, and develop closer industry partnerships.

“In recent years we’ve seen how the onshore industry in the US has reinvented itself.

The offshore industry in Europe has to do the same – harnessing the spirit of innovation at

built the frontier back in its early years,” he said.

“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,” he added.

Mr Van Beurden added: “If costs are low, if the investment landscape is good and stable, and if the people of this country can innovate as they have done for decade after decade, the world will still be relying on the work done here in the North Sea for a long time to come.”


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