Shell to Proceed With Jackdaw Natural-Gas Project as U.K., Europe Seek New Supply

London-based Shell and U.K. officials have stressed the need to expand new oil and gas projects in the North Sea to boost the region’s energy security following Russia’s invasion of Ukraine. The war has contributed to soaring energy prices and set off a race by governments across Europe to secure natural-gas supplies. Countries risk having to ration gas crucial to heating homes and powering factories.

Shell’s Jackdaw plans also have factored into U.K. political discussions this year about a new 25% so-called windfall tax on oil and gas producers, as government officials try to cushion the pain of high energy prices while also encouraging domestic investment. Shell, which is expected to be affected by the temporary tax, said in May it needs a stable tax environment to make long-term investment decisions.

Companies such as Shell will get new-investment allowances for qualifying spending on new projects, helping them lower the amount of windfall tax they pay, according to government outlines of the levy.

“Let’s source more of the gas we need from British waters to protect energy security,”

Kwasi Kwarteng,

British secretary of state for Business, Energy and Industrial Strategy, tweeted in June about the U.K. regulatory approval of Jackdaw. Mr. Kwarteng said the U.K. is boosting renewable-energy projects, “but we are also realistic about our energy needs now.”

“Projects like Jackdaw will help ensure the overall decline in U.K. North Sea production is gradual rather than too steep,” Shell said Monday. It said the project is expected to produce around 40,000 barrels of oil equivalent a day at peak.

The company has said it plans to spend as much as £25 billion (equivalent to around $30 billion) on the U.K. energy system within the next decade, and to use oil-and-gas profit to help boost development of low-carbon energy including electric-vehicle charging stations and offshore wind farms.

Shell said it altered the Jackdaw project plans to decrease harmful greenhouse-gas emissions. But environmental groups have criticized plans for any new North Sea oil and gas projects because of concerns about climate change. Protesters at Shell’s annual shareholder meeting in May focused on Jackdaw as an example of fossil-fuel projects that should be called off, but Shell and other companies say natural gas will be needed for many years to come.

Earlier this month, Shell won a stake in Qatar’s major liquefied-natural-gas expansion project alongside oil companies including

Exxon Mobil Corp.

,

TotalEnergies SE,

ConocoPhillips

and

Eni

SpA. Shell’s stake in the roughly $30 billion North Field East project comprises a 25% holding in a joint venture with state-owned QatarEnergy, which in turn owns a quarter of the expansion phase. The project is expected to boost Qatar’s LNG supplies in part to help meet European supply needs.

The Jackdaw project is located about 155 miles east of Aberdeen, Scotland, and is owned by Shell affiliate BG International Ltd., part of Shell’s roughly $50 billion acquisition of BG Group PLC in 2016.

Shell early in the pandemic delayed the Jackdaw development as energy companies slashed spending in response to flagging demand and plummeting prices. The project at the time was estimated by analysts to be valued at around $1 billion.

Write to Jenny Strasburg at [email protected]

London-based Shell and U.K. officials have stressed the need to expand new oil and gas projects in the North Sea to boost the region’s energy security following Russia’s invasion of Ukraine. The war has contributed to soaring energy prices and set off a race by governments across Europe to secure natural-gas supplies. Countries risk having to ration gas crucial to heating homes and powering factories.

Shell’s Jackdaw plans also have factored into U.K. political discussions this year about a new 25% so-called windfall tax on oil and gas producers, as government officials try to cushion the pain of high energy prices while also encouraging domestic investment. Shell, which is expected to be affected by the temporary tax, said in May it needs a stable tax environment to make long-term investment decisions.

Companies such as Shell will get new-investment allowances for qualifying spending on new projects, helping them lower the amount of windfall tax they pay, according to government outlines of the levy.

“Let’s source more of the gas we need from British waters to protect energy security,”

Kwasi Kwarteng,

British secretary of state for Business, Energy and Industrial Strategy, tweeted in June about the U.K. regulatory approval of Jackdaw. Mr. Kwarteng said the U.K. is boosting renewable-energy projects, “but we are also realistic about our energy needs now.”

“Projects like Jackdaw will help ensure the overall decline in U.K. North Sea production is gradual rather than too steep,” Shell said Monday. It said the project is expected to produce around 40,000 barrels of oil equivalent a day at peak.

The company has said it plans to spend as much as £25 billion (equivalent to around $30 billion) on the U.K. energy system within the next decade, and to use oil-and-gas profit to help boost development of low-carbon energy including electric-vehicle charging stations and offshore wind farms.

Shell said it altered the Jackdaw project plans to decrease harmful greenhouse-gas emissions. But environmental groups have criticized plans for any new North Sea oil and gas projects because of concerns about climate change. Protesters at Shell’s annual shareholder meeting in May focused on Jackdaw as an example of fossil-fuel projects that should be called off, but Shell and other companies say natural gas will be needed for many years to come.

Earlier this month, Shell won a stake in Qatar’s major liquefied-natural-gas expansion project alongside oil companies including

Exxon Mobil Corp.

,

TotalEnergies SE,

ConocoPhillips

and

Eni

SpA. Shell’s stake in the roughly $30 billion North Field East project comprises a 25% holding in a joint venture with state-owned QatarEnergy, which in turn owns a quarter of the expansion phase. The project is expected to boost Qatar’s LNG supplies in part to help meet European supply needs.

The Jackdaw project is located about 155 miles east of Aberdeen, Scotland, and is owned by Shell affiliate BG International Ltd., part of Shell’s roughly $50 billion acquisition of BG Group PLC in 2016.

Shell early in the pandemic delayed the Jackdaw development as energy companies slashed spending in response to flagging demand and plummeting prices. The project at the time was estimated by analysts to be valued at around $1 billion.

Write to Jenny Strasburg at [email protected]