P&T delivers some of the most competitive projects in the industry and manages more than 50% of Shell’s annual capital investment. This can involve oil and gas fields, transnational pipelines, refineries, natural-gas liquefaction trains or petrochemical plants. Some projects entail constructing entirely new facilities and some involve expansions of existing facilities. In 2018, Shell delivered $10 billion cash flow from operations from key projects. There were also 10 new material hydrocarbon producing projects started up, representing a combined peak production of 197 thousand boe/d.
Over the past few years, we have reduced the capital investment required to produce a barrel of oil equivalent. This has largely been done through the methodical specification and competitive scoping of a project followed up by a strong focus on the way P&T executes the project, from its processes through to its standards and IT tools. All these elements must work together to reduce waste, minimise idle time and eliminate duplication of effort – all without jeopardising safety.
In the case of the Penguins field redevelopment in the UK North Sea, for example, tens of millions of dollars of savings were achieved by deliberately giving greater latitude to suppliers to come up with industry-standard solutions for subsea and topsides facilities. This, together with other capital efficiency measures, resulted in the project team generating a $500 million capital reduction with a further $250 million of potential capital-efficiency opportunities.
In the case of drilling, the application of digital technology (see “In Focus: Digitalisation”) combined with better planning and outcome-based contracts has helped to make more than 70% of Shell’s wells “best in class” according to independent benchmarking.
When this is combined with related initiatives to transform supply chains and deploy value-adding technology, the average unit development cost (UDC) of Shell’s major oil and gas projects by the end of 2018 was half that of 2014. In the last year alone, UDC was reduced by 13.5%, creating more value for every dollar spent in 2018. We are working to reduce UDC further over the next few years.