Economic Report 2018

CASE STUDY

In 2018 Shell UK has made three Final Investment Decisions; Penguins Re-Development Project, Fram, and the BP-operated Alligin. These investment decisions are the first in Shell’s UK Upstream business since 2011. As a global company operating in a restricted capital environment Shell UK competes internally with basins across the world for a portion of Shell’s capital investment budget. Shell UK’s first screening criteria is that all new upstream investments have a break-even price below $40/bbl. One of the key tools to achieve this is a methodology called “competitive scoping”, where Shell UK starts with the most basic, yet feasible, project scope imaginable and only adds elements of the project scope back in if they clearly add value to the development.

1

2

3

The second element is supply chain collaboration, working really closely with contractor partners to come up with a project concept and design that is economic.

The third, and perhaps most important part, is delivery today. Shell UK has earned the right to invest in its business through the improvements made over the last four years, but there is a need to maintain that credibility and earn the right for investment every day.

4

5

CASE STUDY

The development of Tolmount, one of the largest southern North Sea gas fields to be discovered in recent years, is being driven forward by an innovative new partnership.

6

The partnership has been formed by Premier Oil and Dana Petroleum, both 50 per cent equity holders in the field, and Humber Gathering System Limited (HGSL), a subsidiary of midstream infrastructure company CATS Management Limited.

7

The partners have put in place commercial agreements whereby the ownership and operatorship of the Tolmount field is separate to that of the infrastructure, known as the Humber Gathering System.

8

HGSL and Dana will construct and own the infrastructure comprising a platform and gas export pipeline, significantly reducing Premier Oil’s capex and allowing it to target its investment and expertise on the subsurface to maximise reservoir recovery. The partnership is a great example of the right assets being in the right hands. It demonstrates the value of upstream and midstream operators working closely together to stimulate future investment and deliver a project that is critical to maximising economic recovery in the North Sea, and to the security of the UK’s gas supply.

9

10

11

27