Thu. Jan 20th, 2022

Royal Dutch Shell apparently can not get a break. In its latest refuge, the Anglo-Dutch oil and gas major pull out the plug about its controversial Cambo development in Britain’s North Sea. This leaves the proposed project, in which Shell would have a 30 percent stake, entirely in the hands of private equity-backed Siccar Point Energy.

The two applied for regulatory approval in June. The British government, under pressure from activists, has not yet given the go-ahead. It’s annoying, but it’s hardly causing investors to sweat.

Cambo is small scale. The developers expect it to produce up to 170 million barrels of oil equivalent over 25 years. Divide that pro rata between the two parties and Shell’s share equals about two weeks’ production – but spreads over a quarter of a century. Of course, the field could eventually yield more and there is also an expected 53.5 billion cubic feet of gas included. But its removal hardly raises immediate financial concerns.

Seen in a different way, however, the project illustrates Shell’s difficulties in managing the energy transition. Cambo would have contributed to Shell’s carbon footprint, justified by being closer to home and generating cash for greener efforts. It did not carry much weight with eco-activists, whose complaints probably found more receptive ears in watch dogs when the UK hosted COP26.

His efforts in other arenas have also suffered setbacks in recent months. The Jackdaw gas field development, also in the North Sea, was frozen in October when the UK’s foreign petroleum regulator for environment and decommissioning refused to approve it without modifications.

The greener Scottish Acorn carbon capture and storage project, a Shell partnership with Storegga, also failed to gain rapid approval. The decision to limit the ready-to-go project, which would have redeployed industrial workers, to “reserve” status was an unexpected setback.

Both projects remain alive and may still see the light of day, albeit in modified form in the case of Jackdaw. But Shell’s obstacles demonstrate the pitfalls on the road to decarbonization.

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