Shell has shelved plans for an innovative subsea gas compression project it hoped could revolutionise offshore production after costs spiralled.
The British-Dutch supermajor had been developing a system using subsea compressors on the Ormen Lange project in the Norwegian Sea that would run without an offshore platform.
The multibillion-pound project was looking at how to extract more gas from the field, which provides a fifth of the UK’s entire gas supply.
The field will eventually lose its natural pressure and subsea compression was seen as cheaper than building a new platform.
But after six years and £5billion of investment, the firm has now decided to put the project on ice.
The decision will not be re-evaluated for several years, until new technology and reservoir information become available, Shell said.
“The decision is based on an updated economic assessment incorporating new cost information for the current concepts and updated analysis of the reservoir,” said the project’s chairman, Odin Estensen.
“The oil and gas industry has a cost challenge.
“This, in combination with the maturity and complexity of the concepts and the production volume uncertainty, makes the project economically no longer feasible,” he added.
The field, about 75 miles north-west of Kristiansund, sits in water up to 3,600ft deep. Gas from the field flows through a 745-mile pipeline from Nyhamna, where it is processed, to Easington.
The field, thought to contain about 300billion cubic metres of gas, has been producing about 70million metres a day since coming on stream in 2007.
The project had been looking at ways of extracting more gas from the field either through platform-less subsea compression techniques developed by Aker Solutions or by installing a tension-leg platform on the site.
Shell said it still supported using subsea compression on the field but the current economics of the project had forced it to be shelved.
Petoro, the Norwegian government’s holding firm and the biggest shareholder in the licence, objected to the postponement, saying the project had already cost “several billions of Norwegian crowns”.
The move shows that “the major oil companies now are going meticulously through their portfolios and cutting the most marginal projects to limit their investment level”, said Haakon Amundsen, an analyst at ABG Sundal Collier.
“There have been six to seven similar delays now, so this would not come as a shock to anyone. This is a gas project with new technology and production many years away, some time in the future, so it is obviously vulnerable to high costs,” he added.