Shell boss says stop viewing North Sea with ‘nostalgia’

Aerial photography of Shell's Brent Delta Platform in the Northern North Sea, which is now being decommissioned
Aerial photography of Shell's Brent Delta Platform in the Northern North Sea. It will be removed and scrapped later this year.

Shell boss Ben van Beurden today urged against looking at the North Sea with “nostalgia” – insisting plans to sell off assets in the basin do not signal the end of the energy giant’s involvement.

The chief executive conceded the company was streamlining its portfolio.

But he stressed the exit of larger firms from mature positions was positive from a North Sea perspective.

He also said it would give the sector a “new lease of life”.

Van Beurden was speaking at the London Stock Exchange as Shell unveiled its 2016 results.

Earlier this week, it announced it will sell off assets that contributed more than half of the company’s UK North Sea production last year.

A first major retreat from the basin in almost a decade, the move signalled the end of an era.

Asked if he agreed with this characterisation, Van Beurden replied: “It is a streamlining of our portfolio, it is getting out of a significant production, a bit over half the production level we have at this point in time.

“But it’s exiting positions that are mature and therefore less strategic in the portfolio we are trying to create, which is a much younger, rejuvenated portfolio.

“In that sense it is a shift; it is a parting of positions in line with our strategic intents.

“But at the same if you look at it from a North Sea perspective it is actually a piece of very good news.

“Because it shows first of all the industry is reacting very well to the difficult environment we are facing.

“These are strong cash generative assets with running room that are in themselves attractive and therefore good assets for other operators to own.”

He said it also showed the effectiveness of the UK Government’s attempts to improve the tax environment and make it easier to transfer late life assets.

“That is exactly what is needed to give the north sea a new lease of life,” he added.

“So we can be nostalgic about the things we have had in the North Sea and we are grateful for what it is we have done and have been able to do.

“But it’s not the end of the North Sea. It’s also not the end of Shell in the North Sea for that matter.

“We still have a growth programme, we are still investing over $700 million a year.”

London-based Chrysaor will pay up to $3.8billion (£3billion) for the company’s interests in nine fields and a 10% stake in Schiehallion, west of Shetland.

In doing so, it will become one of the UK’s biggest independent oil and gas producers.

According to analysts, the sale will add momentum to a $30billion (£24billion) divestment programme, which was intended to balance the books following the Shell’s takeover of BG Group.

Van Beurden said today the company had hit the half-way mark of this strategy.

Chrysaor plans to open an office in Aberdeen and about 400 staff members are due to transfer from Shell.

The decommissioning bill for the assets is expected to come to £3.1billion. Shell will retain a fixed liability of £800million, with Chrysaor taking on the remaining costs.

Upon completion of the sale, Shell will be left with the operatorship of six fields in the North Sea, including Brent Charlie. Its main non-operated assets include Clair, Schiehallion and Etap.