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Conquering new frontiers together

Speech given by Andy Brown, Upstream International Director, Royal Dutch Shell plc, at the Nor Shipping Offshore Conference in Oslo, Norway on June 5, 2013.
Andy Brown

In the last 100 years the oil and gas industry and the shipping industry have sustained a strong relationship in conquering new frontiers to bring the world the energy it needs. Now, as technologies develop and the demand for energy increases, both industries face the challenge of exploring new areas to unlock new resources. In this keynote speech to the Nor Shipping Offshore Conference in Norway, Andy Brown stresses the important role the maritime industry plays within the oil and gas industry and the progress that has been made. He also discusses Shell’s interests in exploring new locations such as the Arctic. Continuous innovation is key in how we operate and both industries can provide value in deliverying new energy resources.

Conquering new frontiers together

It’s an honour for me to be here with you and speak about New Frontiers.

I also want to reflect on the close relationship and interdependency that exist between the oil and gas industry and the shipping industry.

Together, the oil and gas industry and the shipping industry bring energy to the world. Both industries have been pushing the boundaries for over a century in a quest to find, produce and deliver ever more energy to customers around the globe.

To meet the growing demand for energy, there will be a need to substantially increase investment levels and push innovation even further.

Shell’s maritime heritage dates back 120 years. Our long history is marked by many firsts:

The Murex, Shell’s first bulk tanker, set sail in 1892 and its journey through the Suez Canal achieved a revolution in oil transportation.

Shell was an early pioneer in LNG shipping, starting over 50 years ago, with LNG being delivered to the UK on the SS Methane Princess in 1964.

We have come a long way since then. Today, shipping is a very significant part of Shell’s business. We are involved in over 100,000 cargo transfers a year and Shell Shipping & Maritime manages and operates 44 LNG ships, making us the single largest LNG ship operator in the world.

And we continue to develop new technologies aimed at improving our daily operations and unlocking more energy resources.

The relationship between our industries has evolved significantly over the last 100 years.

The maritime expertise in our industries has played an important role in unlocking new energy resources.  From the initial need to move products around the world, we are now integrated in the whole offshore value chain.

From exploring for new resources to daily support to offshore platforms, we now operate drilling rigs, support vessels, tugs, oil tankers, Floating Production and Storage Offtake (FPSOs), Floating Storage and Regasification Units (FSRUs), LNG carriers.

On any one day, Shell has an interest in around 1,500 of the ships and barges sailing the world’s oceans and rivers. And we are proud to say that we manage our fleet well: in 2012 our reliability was a remarkable 99.6%.

Since the late 40’s, when the first commercially viable offshore oil well was drilled in the Gulf of Mexico, the oil and gas industry has continuously pushed the boundaries into ever more challenging offshore locations. The maritime expertise in the industry has played a key role in this process.

In the 70’s and 80’s, the North Sea proved to be a challenging new frontier given its tough weather conditions.

Here in Norway, Troll was declared commercial in the 80’s and is a remarkable offshore milestone. Troll A remains the biggest concrete platform offshore anywhere in the world and it is the tallest structure ever moved over the surface of the Earth by human beings with its 472 meters. Shell was the field developer and our partner Statoil is the field’s producing operator.

Much of the conventional oil and gas exploration and production will continue to expand to offshore areas, deeper waters and more remote and challenging locations.

Greater integration between the energy and shipping industries will continue to be needed to allow us to continue to conquer new physical, operational and innovation frontiers.

Of the remaining 2.7 trillion barrels of recoverable conventional oil resources in the world, the IEA estimates 45% is in offshore fields – and 25% of them are in water more than 400 meters deep.

The challenges are great, but so are the opportunities and excitement to bring these projects onstream.

Ormen Lange, considered as Norway’s first genuine deepwater development, continues to be the deepest producing field in Europe – in water depths up to 1,100 meters. In Ormen Lange, Norsk Hydrol was the operator during the development phase and we took operatorship in 2007. All offshore installations were installed on the ocean floor, under extreme weather conditions and sub-zero water temperatures at the seabed.

The gas is brought onshore for processing; and it is then exported to the UK. I know the Norwegians like to say that every fifth cup of tea in England is heated by the help of gas from Ormen Lange.But, when it comes to deepwater, we are going ever deeper; and since the first FPSO used in the 70’s our industries have been working together in developing new technologies and improving the designs to meet the challenges we face.

In the Gulf of Mexico we have taken Final Investment Decision in Project Stones. It will host the deepest production facility in the world at 2,896 metres (9,500 feet). It is Shell's first FPSO in the Gulf of Mexico and it will integrate a disconnectable turret, which will allow the FPSO to be unplugged from the well system and sail to safe areas in case of adverse weather conditions during the hurricane season for example.

In Malaysia, the Gumusut-Kakap Development will employ the region’s first deepwater Floating Production System (FPS) with a processing capacity of 150,000 b/d and an expected production at peak of 135,000 b/d. Blue Marlin, the FPS load-out vessel, took the FPS to the offshore location last week.

In exploration, to conduct our drilling activities in West Africa later this year, for example, we will use the Noble Globetrotter II, which is currently in sea trials.

We look at the rig and it looks more like a ship than a drilling rig. From the early design phases, the aim was to merge shipping technology with drilling requirements.

It is extraordinary the ability of our industries in keeping a rig like this on station with its dynamic positioning capability, even in adverse weather conditions. The rig is able to drill in over 3,000 meters of water, face 52 feet waves, 100 knots winds and 3.5 knots currents. It has a multi-purpose tower designed to maximise productivity and safety, is more energy efficient, uses less fuel and is shorter and lighter than other deep water drillships with similar capacity. In addition, it allows the crane decks to be removed, allowing it to pass through places as the Panama and Suez Canals, expanding the areas in which it can operate.

We can’t talk about new frontiers without mentioning the Arctic. According to the International Energy Agency (IEA), the Arctic could hold 14% of the oil and over 25% of the gas of the world’s yet-to-be discovered resources. 

We are not new to the Arctic. The oil and gas industry has a long history of successful operations throughout the offshore Arctic and sub-Arctic regions. And we fully acknowledge the the challenges that come with development in such a remote and environmentally-sensitive area.

In Alaska, we drilled multiple wells in the Chukchi and Beaufort Seas in the 1980s and 1990s. We also drilled at the Bering Sea, St. George Basin, Gulf of Alaska and Cook Inlet – where Shell installed the first platforms in challenging conditions. Those platforms are still producing today.

Shell remains committed to building an Arctic exploration program including Alaska. We continue to believe that a measured and responsible pace, especially in the exploration phase, fits best in this remote area.

We have certainly taken the Kulluk incident very seriously and we reassessed our plans for 2013. Future exploration plans for offshore Alaska will depend on a number of factors, including the readiness of our rigs and our confidence that lessons learned from our 2012 drilling program have been fully incorporated.

But we cannot ignore all the developed and deployed operational capabilities to support a multi-year, multi-well offshore drilling programme. We had two rigs operating in the area, both for primary drilling purposes and in the unlikely event a relief well is needed.

Double shear rams on BOPs, a capping stack, an unique Arctic viable containment system and more than 20 marine vessels in place to provide logistics support and oil spill response if needed, with response capability inside one hour for both rigs, with approved capacity to clean up a spill greater than any envisioned worst case scenario discharge, using a combination of mechanical skimming, dispersants, and in situ burning.

We have not taken a decision to drill in 2014. There are some activities that must take place this year in order to preserve the option to drill in 2014, including filing appropriate permits and plans with relevant regulators as well as engaging local communities and contractors. These activities should not be taken for a final decision to drill.

As we continue to move to more challenging and remote areas, we also have to be innovative on how we respond to potential incidents in our operations.

Following the Macondo incident we are taking this even more seriously.  In 2011, nine international oil and gas companies established the Subsea Well Response Project, with the aim of analysing, developing and deploying mechanisms to improve the industry’s response to deepwater subsea well incidents.

It is a non-profit joint initiative between BG, BP, Chevron, ConocoPhillips, ExxonMobil, Petrobras, Shell, Statoil and Total.

Earlier this year SWRP delivered integrated intervention systems that include four capping stack toolboxes and two hardware kits for subsea application of dispersant at wellhead.

SWRP collaborated with the Oil Spill Response Ltd (OSRL) to make this integrated intervention system available to the industry in the event of a subsea well incident. The first intervention system, with a capping stack and hardware kit, is now available for international use from OSRL’s Base in Norway. A further three capping devices and another hardware kit will be delivered before the end of Q3 2013 to the other three locations of the project: Brazil, South Africa and Singapore.

We have just entered the third phase of the project, where we will develop a containment toolkit that can support subsea well incident if well shut-in is not immediately possible. 

Technology development has also been essential to unlock new energy resources and move those resources around the globe. In addition to the innovative approaches seen in deepwater projects, I believe we are seeing unparalleled and exciting innovation in our industry creating new sources of supply and demand for LNG.

We are pioneering with the groundbreaking Prelude FLNG technology. We cut the steel in 2012 and plan to start-up the largest floating offshore facility ever built around 2017. At 488 meters long, it is approximately the length of a par 5 hole on a golf course. When fully equipped and with its storage tanks full, it will weigh around 600,000 tonnes – roughly six times as much as the largest aircraft carrier. It has been designed to withstand severe weather and will stay moored even during a Category 5 cyclone. The Prelude Project is well underway, with construction occurring at various locations around the world.

But we are also innovating in LNG demand. We see tremendous growth potential for LNG as a transport fuel, especially in the marine segment.

Norway was one of the first European nations to focus on this. There are about 34 vessels in Norway operating LNG today. More than a third of the current LNG fuelled vessels in Norway are Platform Support Vessels

Here Shell acquired Gasnor, a market leader in supplying LNG to industrial and marine customers. Of the 34 partly-LNG-powered-ships operating today, Gasnor has contracts to deliver LNG to 31 of them. Leveraging our combined strengths, we will expand Marine LNG bunkering in the rest of NW Europe and beyond.

More recently, in the Netherlands, Shell launched the world’s 1st 100% LNG propelled barge “Greenstream” – which is going to operate along the Rhine. And in North America we are developing two new LNG corridors, primarily for the marine industry in the Gulf Coast and Great Lakes areas.

I have no doubt that we will need to continue to push new physical and innovation frontiers in the future as we move to deeper water and increasingly remote locations, and as the volumes of oil and gas shipped around the world increases.

As mentioned, the oil and gas industry and the shipping industry have enjoyed a close relationship over the last century and they are becoming increasingly more integrated.

I see fertile ground for further innovation and value creation for both our industries.

Jointly we will deliver ever more challenging development projects in remote and harsh ocean environments, and provide energy to markets around the world.

Bringing together owners and operators across the shipping, and offshore oil and gas industries, to discuss and progress common issues, particularly with regards to safety, will be a positive step forwards. One less safety incident is one more success for the industry

Thank you.