West of Shetland production to overtake North Sea for Shell and BP’s UK portfolios by 2020, says GlobalData

Over the last four years oil and gas production in the West of Shetlands has risen and with that, a growing relevance for the biggest players still active in the UK continental shelf (UKCS), says GlobalData, a leading data and analytics company.

The company’s latest research reveals that the West of Shetland (WoS) area retains the attention of major Exploration and Production (E&P) players in the region; however infrastructure restraints could hinder future growth potential in the basin.

Despite the US based E&P majors, such as Chevron and ConocoPhillips largely divesting out of the UK’s E&P sector of late, their European peers have not followed suit. Of the highly successful 30th UK Offshore Licensing Round held in 2017, approximately 75% of the licensed WoS blocks had European major* participation. Moreover, European majors have stakes in 80% of the Planned and Announced projects in the area compared to approximately 40% in the North Sea.

Daniel Rogers, Upstream Oil and Gas Analyst at GlobalData, commented: “In 2018, Royal Dutch Shell (Shell) and BP Plc (BP)’s hydrocarbon production combined accounted for over half of the WoS total volume. Over recent years both companies have seen North Sea production volumes lose dominance in relation to their UK portfolios. As a result, the WoS is set to overtake the North Sea as Shell’s major producing basin in the UK by 2020, whereas this occurred for BP in 2018”.

The majority of upcoming field developments in the area are oil focused as oil processing capacity at the Sullom Voe terminal is currently around half utilized with expected excess capacity available over the near term. However, the Shetland Gas Plant (SGP), where the areas gas is collected, processed and exported, is currently running at less than 25% spare capacity and newly discovered gas volumes in the basin could push the infrastructure to its limits.

Rogers continued: “Total’s recently discovered Glendronach gas-condensate field is expected to add over 200 million cubic feet per day (mmcfd) of gas supply to the SGP at its peak and could commence production as early as 2021. This, in addition to gas volumes coming from the Cambo and Rosebank oil field developments could further strain the existing infrastructure.

“Operators looking to develop new gas fields in the WoS through the mid-2020s could be challenged by the areas capacity restraints. The investments required for facility expansions may impact project returns and force operators away from marginal gas developments.”

*European majors refer to Royal Dutch Shell, BP Plc, Total SA and Equinor ASA