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Shell boss hails ‘huge step up’ in North Sea performance

By Mark Williamson: Group Business Correspondent

ROYAL Dutch Shell finance chief Jessica Uhl has hailed a “huge step up” in performance by the company in the North Sea and underlined the fact it sees big potential in the area.

Speaking after Shell became the latest giant to report a fall in profits amid renewed oil price volatility, Ms Uhl made clear the oil giant’s focus in the North Sea has shifted to growth after a period of retrenchment.

Shell sold a raft of North Sea assets and shed hundreds of jobs in response to the plunge in the crude price from 2014 to early in 2016.

However, Ms Uhl said the restructuring had left the firm focused on assets it felt had long term value and would allow the firm to improve returns on investment while boosting operating efficiency.

“There’s been a huge step up in performance in the UK,” the American executive told reporters.

She added: “It’s really impressive to see what the business has done in terms of reshaping the capital and operating cost profile, which has made that business a more competitive business and has created the desire to increase exposure to the UK.”

Ms Uhl’s comments will boost hopes that the recovery in North Sea activity seen in recent months will continue, bringing some relief to the hard-pressed supply chain.

Read more: Shell approves fresh North Sea project as interest in area grows

Firms that help oil and gas companies develop and operate fields are still grappling with the fallout from the crude price plunge, which triggered deep cuts in spending in the area.

The North Sea must compete for investment with projects around the world at Shell, which has big positions in growth markets such as US shale and offshore Brazil.

Ms Uhl observed “I think we’ve got a good portfolio and we’ve got projects in the hopper in terms of investing in production growth in the North Sea going forward.”

While Shell was reported last month to be in talks to buy BP’s stake in the bumper Shearwater gas field in the North Sea for $250m, Ms Uhl made no mention of potential acquisitions.

She noted Shall has approved a range of North Sea projects in the last 18 months.

These include plans for an increase in capacity at the Shearwater platform 140 miles east of Aberdeen and a revamp of the giant Penguins field off Shetland.

BP approved North Sea projects last year, after selling assets in the area and cutting jobs amid the downturn.

Noting that Shell needs to keep a strong societal licence to operate, Ms Uhl defended plans to leave the legs of platforms used on the giant Brent field on the seabed when decommissioning work is completed.

Read more: North Sea oil clean up costs alarm MPs with bill set to top £24bn

She said the Shell team working on the project had done a stellar job of engaging with a full range of stakeholders. Shell had done everything it could to bring the right expertise to bear. She believes the plan submitted to the regulator is the right choice from an environmental perspective.

Ms Uhl defended Shell’s response to the problem of climate change noting the work it is doing to support the development and uptake of renewable energy. Growing gas production would help reduce the use of energy sources that result in higher carbon emissions, such as coal.

Shell made $5.3 billion (£4bn) underlying profits in the first quarter, beating analysts’ expectations of around $4.6bn. It made $5.4bn in the same period last time.

Brent crude fell from a four-year high of $85 per barrel in October to around $53/bbl in January amid booming production in the USA. The disruption of supplies from Iran has helped the price recover to around $71/bbl.

Shell expects to buy back $2.75bn shares in coming months under a plan to return $25bn to investors in total by repurchasing shares.

It held the first quarter dividend at 47 cents.

Royal Dutch Shell A shares closed up £0.4 at £24.53.

BP’s first quarter profit fell to $2.4bn from $2.6bn.

SOURCE

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