Energy Voice | Shell boss on 50 years in the ABZ project – Auto Republish

In spite of everything hurled by the North Sea and global market conditions across half a century, and despite predictions to the contrary, Shell remains a big player on the UK Continental Shelf.

A characteristic throughout has been a quest to lead.

Driving Shell forward is VP Upstream President Steve Phimister who, by coincidence, was born the same year as Shell’s UKCS odyssey began 50 years ago.

The super-major has lived through boom times followed by harsh periods when commodity prices were in the basement and, from the late 1990s, speculation grew as to whether such companies had a future in the North Sea.

“You would have been excused a number of years ago to look at a company like Shell and say, that’s the past, not the future,” says Phimister.

“Why? Because with the crises came big changes and smaller entrants were attracted while majors were selling assets and trimming footprints.”

But exit was not an option for Shell. In short, the company chose to lead change, not fight it.

Phimister said: “We have learned and become adept at competing with the best players. We have adapted.

“Shell has moved to an extremely good place. In 2014 we were around $45 per barrel unit operating cost (uoc); today it’s $15.”

Intriguingly, today’s $15 a barrel was very close to the target lifting cost figure the UK offshore industry was aiming for as it strove to recover from the late 1999s downturn, which was the second major price shock to hit the North Sea.

As a result of the latest boom-bust cycle to hit the UKCS, the industry set itself a target to halve unit production costs.

In Phimister’s opinion, Shell has out-performed the basin for productivity and production efficiency.

“Oil & Gas Authority (OGA) data shows that, over the last two years, we were the biggest improver,” he says.

“We’re not the best in the basin, but we’re approaching it if not already top quartile.

“Three years ago that wasn’t the case.

“You can’t survive in the current climate and get ready for the future until you are operationally excellent.

“But what I also want to talk about is the vision … the strategy … we have. Despite talk a number of years ago that the majors were leaving the basin, they are probably the most significant investors on the UKCS today.

“Shell has got its shop in order to be sharp and on the ball, because that’s what drives your credibility and cash flow to invest. We’ve also been very clear on the portfolio we want, where we want to play, how we’re going to play it and when we’re going to invest.

“For example, earlier this year we took the FID on the redevelopment of Penguins.”

Phimister is clear about Shell’s intentions to play in all four main segments of the UKCS … Northern, Central and Southern North Sea plus West of Shetland (Atlantic Frontier). Incredibly, the company’s pioneering fields, the SNS Leman gas discovery and NNS Brent oil find are still producing.

There is emphasis on the CNS and WoS as both offer sizeable opportunities. However, redevelopment of Penguins in the NNS and plans for tight gas in the SNS demonstrate their continuing value.


Phimister sees the SNS staying important to Shell. It’s similar to the CNS in that its future lies in maximising use of existing hubs and infrastructure. Beyond that there’s the offshore tight gas play that many believe could lead to a revival of the sub-basin.

“I hope companies like Shell will actively invest in pursuing tight gas, keeping gas flowing into Bacton Terminal and the UK gas network.

“It’s also important for future security of supply for the country. It’s not dissimilar to the challenges associated with small pools in the CNS, though the geologies are different.

“In global terms, tight gas is common and is being produced. If you look at the work that’s going on at the OGA with a number of companies working together on the SNS tight gas play, I suspect the day when we can start to apply what we know from elsewhere within Shell’s global portfolio in the North Sea may not be far off.”


Leapfrogging to the Northern North Sea, home of iconic Brent, Phimister is optimistic there is a viable future East of Shetland and points to the Penguins redevelopment as evidence.

Brent is Shell’s UKCS totem but production is now small amid decommissioning. Over the past 20 years Shell has sold off much of its NNS portfolio.

“We’re decommissioning Brent,” says Phimister. “Delta’s topsides are sitting on a quayside in Hartlepool, and we expect to be in a position where we can do the topsides lifts on Bravo and Alpha when the time is right.

“Charlie is still producing and Penguins produces over Charlie until cessation of production for Charlie. The bypass line for Penguins is already in place and we’re redeveloping the cluster.

“There will be eight new wells on top of the existing seven. A cylindrical FPSO (Sevan type) will be installed, creating a new hub. We have exploration acreage, so who knows what else is out there.

“Penguins will be capable of twice the production when first developed. There is the possibility that Penguins extends into surrounding acreage in due course.

“So is there a way of taking the NNS forward with rejuvenations and redevelopments? Yes, I think there is.”

But another benefit is transferring NNS experience elsewhere, notably using the Brent depressurisation project as a template for the CNS Pierce field in the next two years.

WoS and CNS

Heading West before tracking South-East to the CNS, Phimister is excited about both for exploration.

“If you look at the 29th Round, we were successful and in the 30th we were awarded the most blocks,” he says.

“Our exploration strategy is around those big new plays … north and south of Cambo and in the Schiehallion and Clair areas.

“We also already hold acreage with existing discoveries like Tornado and Suilven. Also, if Cambo is successful and we build a new hub, other finds become economically viable.

“In the CNS we’ve taken acreage around our core, existing producing hubs. We’re already into the seismic stage, but we bid wells in the next year or two around key production hubs Gannet and Nelson.

“Gannet is one of the biggest success stories. It’s gone from 10-15,000bpd to 35-40,000bpd in four years.”

He’s also excited about the HP/HT asset Shearwater that has been a sterling producer since 2000.

“I expect there to be investment decisions this year to sustain that hub, increase value and bring other fields in.

“In the CNS, the focus will be on near-field exploration,” adds Phimister.

“You will see our CNS business drive hard around leveraging existing business; for operational excellence and integrity; winning business and extending life … maximising economic recovery. It’s a clear strategy.”

Indeed pushing hard in the CNS is key to rebuilding equity production from the UKCS following completion in 2016 of the £47billion takeover of BG Group and subsequent sale of assets to Chyrsaor.

For a time, the BG Group buy pushed Shell’s UKCS production past 240,000bpd while the Chrysaor sale took it down to around today’s 130-140,000 barrels a day.

“That comes from extending the life of those core CNS hubs … new-field tie-backs whether ours or third party,” says Phimister.

“Obviously we’d like to drive our own production and others and bring in new fields. Fram is a good example. We hope to see the likes of Arran come in too. And we’re looking at infrastructure investments to extend field lives.

“Fram is expected to add around 12-14,000bpd; Arran is larger but fits well into the common understanding of a ‘small pool’.

“Neither looked investible, but where operators collaborate with the supply chain, new development concepts – even in a lower oil price setting – start to make sense.

“I don’t think we’ve looked at a development in years where we haven’t taken 40% of the cost out.”


That’s all very well during crises where one of the industry’s reactions has been to work collaboratively. But when the good times return memories shorten.

The question becomes, how can Shell sustain the approaches developed as a result of MER (Maximising Economic Recovery) doctrine and the third major downturn?

“First and foremost is this very important mindset issue,” warns Phimister. “Why would anybody who can do something for half the price of five years ago go back to doing it for double?

“The UK sector has been through tough times; the supply chain is now smaller. So how do you avoid boom-bust?

“Key differences include the presence of significant initiatives.

“However, it’s very clear there are parts of the supply chain that are not yet through the woods.

“It comes back to us as operators to say: ‘What is the realistic and sustainable activity level (for the UKCS)? How do we want to contract to the supply chain? How do we want to share risk and reward? What’s the best way for us to collaborate in having a sustainable, long-term investment profile?’ That’s the key.

“Our future is dependent upon attracting capital.

“We can’t do activity if we drive supply chain companies out of business. We need to ensure we don’t reinforce the boom-and-bust cycles.

“We’re investing $600-900million a year over the next several years in all parts of the UKCS.

“We have a view on when we’re going to do things, when we may invest and what it will do for us in achieving objectives; we have become a very fit organisation.

“Combine that leanness with sharpness and that ability to sniff out the opportunities and implement a vision of where we want to be in a few years, which is wholly aligned with Vision 2035 and MER UK, then you have a very strong platform to build on.

“It is about getting the best from what you’ve got. Look for the sweet spots in your business. Invest, ensure the integrity and long-term future of assets.

“Stimulate the wells, work in the reservoirs, in the infrastructure subsea, look for new tie-backs, make sure topsides are in great condition, carry out infill drilling.”

Phimister is as emphatic about onshore infrastructure. After all, the gas terminals St Fergus, Mossmorran and Bacton are gateways to market.


“Let’s not beat around the bush, as an industry there have been incidents from which we have (collectively) learned and Piper Alpha is a case in point.

“This industry has improved dramatically, but that doesn’t mean you can be complacent.

“We work in an environment where we must remain on top of our game and control the risks. We’re not perfect and have to continue investing and talking and learning and trying to get better.

“We say and mean it, safety is the number one priority.”

“What is the point to being a profitable, efficient production business if you’re hurting people or damaging the environment; it makes no sense.

“Let’s not beat around the bush, as an industry we have been a number of incidents and accidents from which we have (collectively) learned and Piper Alpha is a case in point.

“At the Piper 30 Conference, it was very clear. People were talking very openly saying: ‘Let’s make sure we have learned; let us not the mistakes of the past and get better.”


The oil & gas industry is looking over its shoulder at the next energy revolution, fuelled by the need to get carbon emissions under control.

The company, through its respected and sophisticated Shell Scenarios initiative has been spelling out the likely trajectory of low carbon versus coal, oil and natural gas.

In the context of Northwest Europe, what is Shell’s position? How is it making itself fit for the future?

Phimister said: “Fit for the Future is indeed a part of where we’re going. This is a conversation I have a lot with younger people in our organisation and within the OGUK board.

“We are relevant and demand will go on increasing. The oil & gas share of that market will reduce, but will still be enormous.

“What is clear is we have to constructively and swiftly move to a different make-up in the energy system if we’re going to achieve the Paris Agreement’s Two Degree Pathway.

“That means things have to change. Oil companies will have to decide whether to become a part of that or not.

“Shell has made a very clear choice that we will be, helping to influence and investing to make that change.

“That’s why Royal Dutch Shell’s CEO Ben van Buerden has committed to halving emissions in our chain. Only 15% of emissions associated with Shell products comes from our production. The other 85% relates to the consumption. To say: ‘We’re going to halve total emissions by 2050’ is a big statement.”

So how does Phimister think Shell’s NWECS business can be made to fit with and be relevant to the van Beurden ambition?

“We have a very clear strategy driving investment towards these types of energy sources.

“You also apply skills and capabilities into other forms of energy, which we are doing through our Shell New Energies organisation.”

The company is increasing capital expenditure for its New Energies division, to $1-2billion (£750million to £1.5billion) a year for 2018-2020, up from a previous plan of up to $1bn a year by 2020.

Regardless as to whether it is classic hydrocarbons extraction or new energies development and deployment, what Phimister is basically saying is that the many thousands of people who have made it happen for Shell in North Sea oil & gas must surely serve as inspiration to successors who take this energy giant forward.

“Look, all my working life I’ve been in oil & gas and the single biggest reflection I have around Shell in the North Sea is the innovative and creative people who work in this industry.

“Can you imagine those folk who were on Forties and Brent originally, or on Leman way back when they were pioneering North Sea oil & gas.

“Can you imagine how they felt about it?

“And if you think of the pride that is still about today in terms of where we’re at in the hydrocarbons lifecycle while also looking forward, determined to influence the energy system and go somewhere else, yes, that will involve technology and investment, but its people who make it happen.

“It did back at the beginning of the North Sea story with Leman and Brent and will go on doing so and for a long time to come.”

Source link

This post was automatically re-published from 3rd party sources without human review. The content may not reflect the views of the Mossmorran Action Group and was reposted due to containing keywords that are of interest to the Action Group. If you feel the content is inappropriate please contact us and we will review the post.

Leave a Reply

Your email address will not be published. Required fields are marked *

Resident-led action group seeking redress from the long-term social, health and environmental impacts from the Mossmorran facilities in Central Fife operated by ExxonMobil (Fife Ethylene Plant) and Shell (Fife NGL).


Press Inquiries

Scroll to Top