Shell resubmits North Sea gas project knocked back by regulator amid 'self-reliance' drive

Shell on March 18 published revised plans for its Jackdaw gas project in the North Sea after a rejection by environmental regulators, saying its new proposal fits with plans to curb upstream emissions, as government attention shifts to prioritizing security of supply.

Shell published a public consultation on the revised plans for the "ultra-high pressure, high-temperature" field, which would feed oil to the Forties pipeline and gas to processing facilities in Scotland, saying it envisaged project approval in the next few months, drilling commencing in the second half of the year and production potentially starting in 2025.

The plans envisage production peaking in 2026, assuming startup in 2025, with gas production that year averaging 4.9 million cu m/d in a mid-case scenario and liquids production averaging 899 mt/d, or around 10,000 b/d.

The previous rejection of the project centered on Shell's plans for offshore flaring of the high levels of CO2 contained in the Jackdaw production stream -- around 4% of the reservoir gas -- with the environmental regulator wanting Shell to direct the gas to the Judy facility operated by Harbour Energy and Shell wanting to tie the field to its own, newly revamped Shearwater hub for onward delivery to St Fergus in eastern Scotland.

The new plans envisage improvements to Shearwater facilities for flaring the CO2, and stress the role that could be played by the proposed Acorn carbon capture and storage project, which will be based at St Fergus, but has yet to get government approval; the Acorn project was allotted "reserve" status by the authorities in October 2021, prompting protests from the Scottish government.

Shell says maximizing gas flows through the Shearwater hub will also boost the viability of plans for "electrification" of the oil and gas sector, which envisage connecting offshore platforms with low-carbon power sources such as renewables to reduce operational emissions. While not revealing the project cost, Shell described the economics of Jackdaw as "marginal."

The revised plans come as the authorities prepare to relaunch offshore licensing after a hiatus while the country hosted COP26 climate talks, aiming to incorporate climate goals in the licensing process. However, Prime Minister Boris Johnson has also signaled a shift in strategy to "self-reliance" in energy supply, aimed at limiting exposure to overseas price spikes and Russian gas supply dynamics.

Shell justification

Shell said in a worst case scenario Jackdaw emissions would be less than 1% of emissions from the UK continental shelf in the field's peak production year, or 131,000 mt for that year.

"We have been and remain determined to minimize the environmental effects of [Jackdaw] including by reducing atmospheric emissions. The development of Jackdaw via the Shearwater platform and the onshore St Fergus Gas Terminal is the only economically viable option for Shell UK. Tie-in to the Shearwater hub has been central to unlocking the Jackdaw resource, which would otherwise remain untapped," it said.

"At least 70% of project value is realized from processing via the Shearwater hub and the associated gas-condensate processing system at St Fergus and Mossmorran -- as opposed to condensate being blended with crude oil. No other processing hub would unlock this value and as such these other options are not viable for Shell UK.

"The fact that previous operators were unable to economically develop Jackdaw indicates the marginal nature of Jackdaw economics" it said. "In turn, the... development is a key enabler for Shearwater hub longevity, enabling future tiebacks to maximize development of the national resource base, as well as affording time to mature two critical pillars of the North Sea Transition Deal: firstly, electrification of the Central North Sea, of which the Shearwater hub is a key part. Secondly, the Acorn carbon capture and storage project, based at the St Fergus gas terminal, is expected to create a CCS/hydrogen low carbon energy hub."