The new boss of oil giant Shell admits the company’s North Sea operations last year were ‘disappointing’ as he targeted improvement from its production.
Ben van Beurden, who took over as chief executive at the Anglo-Dutch major at the turn of the year, said too much oil had been lost due to unplanned maintenance work on its operations across the UK Continental Shelf.
And the company refused to rule out selling off further North Sea assets over the next two years after describing the value of some as ‘at the margins of cost’.
“High maintenance is a fact of life, but we have to be honest, the North Sea has disappointed in 2013,” said Mr Van Beurden.
“We need to arrest the decline as we have in Oman.”
Production fell across Shell’s North Sea operations by 22% last year, down 26,000 barrels of oil equivalent. As much as 15,000 of that was due to maintenance downtime and unscheduled maintenance, the chief executive admitted.
Last month the company announced plans to sell off three of its North Sea fields as part of a planned £9billion asset disposal over the next two years.
The Anasuria, Nelson and Sean fields were put on the market, and chief financial officer Simon Henry said the company was continuing to review its assets.
“We have to look at our asset integrity… which assets justify ongoing investment and which receive increased investment to sustain life.” said chief financial officer Simon Henry.
“Quite a few are at the margins of cost.”
Mr Van Beurden praised the findings of Sir Ian Wood’s review of the UK Continental Shelf, and said the company welcomed the findings that North Sea operators would need to work closer together in future.
“I think Sir Ian did a very good job analysing what the future is on the UK Continental Shelf,” he said.
“Extending the life of the UK continental shelf can’t be a bad thing at all.”
The company confirmed it was also planning to cut spending on its US upstream operations by a fifth this year and exit some of the less performing sites as it changed its approach to the shale gas market.
“Shell has a strong asset base and industry leadership in many of its growth themes,” said Van Beurden.
“While this position of strength gives confidence for the future, it is also clear that we need to get a tighter grip on performance management in Shell.
“I am determined that, by focusing sharply on our three key priorities – better financial performance, in particular in our Upstream Americas and Downstream businesses, enhanced capital efficiency, and continuing strong project delivery, we will continue to grow our cash flow and improve our returns.”
The firm is to restructure its downstream operations, after the success of its chemicals and biofuels businesses was hampered by the ongoing decline of the refining market.
“Shell has considerable strengths in portfolio, technology and management capabilities,” said Mr Van Beurden.
“However, we must improve profitability in several areas. We are taking stock of our investment opportunities and operating positions.”
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