Royal Dutch Shell to develop third North Sea oil, gas project in 2018

The Royal Dutch Shell said on Monday that it will develop the Fram gas field in the North Sea, its third project approval in the aging basin this year, Reuters reports.

Shell’s final investment decision (FID) on Fram follows the green light for the expansion of the Penguins field in January, and the 50-50 joint venture Alligin field in the west of Shetlands area which is operated by BP.

The UK North Sea is one of the world’s oldest offshore basins whose production started in the 1970s and peaked in the late 1990s. It has enjoyed a modest production revival in recent years thanks to a wave of new projects coming on stream.

Shell and other producers have used the collapse in oil prices since 2014 to reduce costs of projects thanks to lower rig rates, simpler designs and the use of technology.

The Fram project will include drilling two wells that will be connected by pipeline to Shell’s Shearwater platform rather than to a new one, saving money and allowing faster development.

It is expected to start production in early to mid 2020 and will generate profit at oil prices of $40 a barrel, Steve Phimister, Shell’s U.K. head of upstream said. Benchmark crude oil is currently trading at around $75 a barrel.

“It is really good momentum that we’ve got going. It is very much in line with our strategy to maximize the use of our existing infrastructure in production hubs,” Phimister said.

Shell currently produces 140,000 bpd and plans to at least maintain that level by 2030, he told Reuters.

Fram is operated by Shell, which holds a 32 percent stake in the field, while Exxon Mobil’s UK subsidiary Esso holds the remaining 68 percent.