15-11-04 Shell, the world's third-largest oil company, said it's looking to the North Atlantic Margin for its next big European oil and gas finds as it seeks to replace older, flagging North Sea reserves.
The margin includes the coast off northern Norway and deep waters west of the Shetland Islands, where it secured new exploration blocks in June and September.

In the North Sea, where undiscovered reserves are smaller, Shell intends to pursue new projects that take advantage of its existing pipelines and platforms, particularly where they involve natural gas.
"The idea that the North Sea is old and dying and all the majors want to leave and everybody wants to turn off the lights is nonsense," said Tom Botts, the head of Shell's European exploration and production business. "There's at least as much to play for in the UK as has already been produced."

Chairman Jeroen van der Veer, 57, who will become CEO when Shell combines its UK and The Netherlands parent companies next year, has expanded global exploration spending after Shell disappointed investors by writing down its oil and gas reserves estimates four times this year.
Shell will spend $ 1.5 bn a year in 2005 and 2006 on exploration, with half the drilling costs spent on hunting "big cats," or prospects greater than 100 mm barrels. Of the 19 big cats targeted for 2005, two are in Norway, one in the UK and one in Denmark. Shell produces about a quarter of the North Sea's oil and gas, through interests in some 50 fields.

Overall, Shell is putting more effort into exploration in places such as Nigeria and the Gulf of Mexico, and its LNG project in Russia. It has sold some North Sea fields, including fields it inherited through its 2002 acquisition of Enterprise Oil.
In Europe, "Shell is looking at the frontier areas for bigger fields: mid-Norway and west of Shetlands," Rhodri Thomas, the head European analyst at oil consultants Wood Mackenzie said. "They are active in tie-back fields in the North Sea, mostly in tying back fields around existing infrastructure."

North Sea discoveries come "in smaller packages," Botts said on November 11 in St Fergus, Scotland. "It is becoming more technically difficult and challenging and we know the UK continental shelf has a relatively high cost compared with other basins around the world."
The company was still the second-largest driller of exploration wells in the North Sea last year, Botts said after an opening ceremony for Shell's new Goldeneye gas field, which will supply 3 % of UK gas demand.

Wood Mackenzie analysts estimate Shell ventures drilled 16 exploration wells in Europe last year, including so-called side- track wells, compared with nine so far this year. The UK and Norway together provided 497,000 bpd, or 21 %, of Shell's oil production in 2003, the same as its Middle East operations. Shell pumped 414,000 bpd in the US, its biggest producing country.
"There's a realignment of investment," Tom Cross, 43, the CEO of Dana Petroleum, an independent UK producer, said. "There has been a steady stream of divestments from BP and Shell, which are starting from such a huge portfolio in the North Sea."

Dana and Venture Production won government approval earlier to develop the Gadwall in the central UK North Sea, a 6.6 mm-barrel oil field they bought from Shell and ExxonMobil last year. Shell drilled the field in 1996. Biggest Seller
During the past year Shell was the biggest seller of oil and gas field assets in the UK, and the biggest overall asset trader, selling 15 and buying two, according to Shell data. ENI, Europe's fourth-largest oil producer, made 12 sales.

Talisman Energy, an independent Canadian producer run by former BP exploration manager James Buckee, was the biggest buyer in the UK, with seven purchases, followed by other small companies Perenco UK, Tullow Oil and Venture.
"The progression of assets now is to put them in the hands of the most suitable size of companies," Dana's Cross said. "If the oil price fell, the transfer would be quicker."