Shell, UK regulators revive talks on North Sea gas field development

By Ron Bousso and Dmitry Zhdannikov

LONDON, Jan 20 (Reuters) - Royal Dutch Shell and
British regulators have revived talks on developing the Jackdaw
gas field in the North Sea as the government struggles with
soaring gas and power prices, company and industry sources said.

In recent weeks, Secretary of State at the Department of
Business, Energy and Industrial Strategy Kwasi Kwarteng has
repeatedly highlighted the importance of the North Sea oil and
gas industry despite climate activists pressing Britain to
reduce its dependency on fossil fuels.

The UK's Offshore Petroleum Regulator for Environment and
Decommissioning (OPRED) in October rejected https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1025763/BG_Ltd_-_REG_12_1__Notice_-_Further_Information_Request_Redacted.pdf
on environmental grounds the development plan for the Jackdaw
field, which has reserves of between 120-250 million barrels of
oil equivalent.

Shell, which at the time said it was "disappointed" by the
decision, has in recent weeks renewed talks with OPRED on a new
environmental plan, according to two company sources.

A Shell spokesperson said: "We continue to work with the
regulator to explore options around developing the Jackdaw
field."

The Department for Business, Energy and Industrial Strategy,
under whose umbrella OPRED operates, declined to comment.

British gas prices hit an all-time high above 450 pence per
therm in December amid dropping domestic output, low inventories
and tensions with Russia. Although they have since dropped to
around 180 p/therm they are still more than 3 times higher than
a year ago, threatening a cost of living crisis when an energy
price cap is lifted in April.

Greg Hands, Minister of State for Energy, Clean Growth and
Climate Change said in a Jan. 12 tweet https://twitter.com/GregHands/status/1481285570412355587
that he had held talks with Shell to discuss the North Sea
transition deal and the future of gas production.

The future of the Jackdaw development, pivotal to Shell's
plan to develop natural gas output at the Shearwater hub in the
central North Sea, was high on the agenda, according to three
people close to the discussions.

Shell and OPRED are now attempting to reach an agreement on
how to transport natural gas from the Jackdaw field to the St.
Fergus onshore terminal near Peterhead in Scotland, according to
two sources close to the talks.

The company had planned to extract unwanted CO2 from the gas
on the Shearwater platform, burning the unwanted carbon offshore
and transporting the treated gas onshore via a newly built
pipeline.

OPRED rejected that plan but offered Shell an alternative
of transporting the untreated gas via Harbour Energy's
nearby Judy field to the St Fergus terminal where the CO2 could
be flared, according to the sources.

OPRED's October decision on Jackdaw, which was followed just
weeks later by Shell announcing it was also pulling out of the
Cambo oilfield project, cast a shadow over the future of the
British North Sea's oil and gas industry.

But Kwarteng has said turning off North Sea oil and gas
overnight would put energy security, jobs and industries at
risk, increasing dependence on foreign imports.

"There has to be a transition, not extinction," he said in a
Jan. 18 tweet.

(Reporting by Ron Bousso, Shadia Nasralla, Dmitry Zhdannikov;
Editing by Kirsten Donovan)