ROYAL Dutch Shell chief executive Ben van Beurden has said the company expects to invest billions in the North Sea and declared the decision to sell around half its portfolio spelled good news for the area.
Two days after Shell announced the sale of a basket of North Sea assets to Chrysaor for up to $3.8 billion (£3bn) Mr van Beurden emphasised Shell expected to remain a big player in the area for years.
“It’s not the end of Shell in the North Sea,” Mr van Beurden told journalists. “We still have a growth programme in the North Sea and are investing over $700m a year for years to come West of Shetland in growing our production.”
The Dutch executive said while Shell had wanted the UK to remain in the European Union the prospect of a hard Brexit did not have significant implications for its investment levels in the country.
Asked if the deal to sell assets producing more than 100,000 barrels daily to Chrysaor marked the end of an era, Mr van Beurden said the sale reflected a shift at Shell.
“It’s exiting positions that are mature, are therefore less strategic in the portfolio that we are trying to create, which is a much younger, rejuvenated portfolio.”
Shell is developing giant fields West of Shetland with BP, which are expected to produce thousands of barrels of low cost barrels daily for years.
Mr van Beurden thinks the change of focus at the firm will benefit the area by helping put assets in the hands of firms that may be more likely to invest in them than giants.
Regarding the Chrysaor sale, he noted: “From a North Sea perspective it is actually a piece of very, very good news because it shows first of all that the industry is reacting very well to the difficult environment we are facing.
“These are strong cash-generative assets with running room that are in themselves attractive, and therefore are good assets for other operators to own. It fits the strategic intent of a new player like Chrysaor who focus on these types of assets and get more value from them.”
Chrysaor’s chief executive Phil Kirk has said the company aims to boost output from the assets it is buying from Shell and is up for more North Sea deals.
Mr van Beurden added the deal showed the UK Government had improved the tax environment in the North Sea and also made it easier from a regulatory perspective to transfer late life assets.
“That is exactly what is needed to give the North Sea a new lease of life,” he noted.
Asked if Shell might sell other North Sea assets, Mr van Beurden said it would not comment on whether any deals may or may not happen.He noted: ”There will be continued work on the edges of our portfolio.”
Mr van Beurden said the Chrysaor deal will not involve any job losses. Around 400 Shell staff will transition to private-equity backed Chrysaor, which has about 20 employees currently.
Shell has cut around 1,000 North Sea jobs since 2014 and announced plans to close its accounts centre in Glasgow. These will put nearly 400 posts at risk.
The company employs around 1,750 in the North Sea.
Mr van Beurden said the company has made good progress with efforts to reshape its portolio and to cut costs after completing the £37bn takeover of BG, which it announced in 2015.
It has set out to raise $30bn from divestments to cut debt and help maintain payouts to investors. Sales worth $10bn in total have been completed or agreed, with $5bn in the pipeline.
Shell thinks global demand for energy will increase in future, driven by growth in China and emerging markets.
However capital investment is likely to remain at the bottom of the expected range of $25bn to $30bn for years. Shell aims to make further cost savings as the portfolio develops.
The company is using a $50 per barrel crude price in its planning. Brent crude fetched around $57/bbl yesterday. It fell from $115/bbl in June 2014 to $27/bbl in the first quarter of last year.
Shell made $1.8bn profit net of one offs in the fourth quarter, against $1.6bn last time.Full year earnings fell to $7.2bn from $11.5bn.
The company maintained the fourth quarter dividend at 47 cents per share.
Royal Dutch Shell A shares closed up 28.5p at 2165.5p.
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