By Ron Bousso and Dmitry Zhdannikov
LONDON (Reuters) - Royal Dutch Shell and British regulators have revived talks on developing the Jackdaw gas field in the North Sea as the government struggles with soaring gas and power prices, company and industry sources said.
In recent weeks, Secretary of State at the Department of Business, Energy and Industrial Strategy Kwasi Kwarteng has repeatedly highlighted the importance of the North Sea oil and gas industry despite climate activists pressing Britain to reduce its dependency on fossil fuels.
The UK's Offshore Petroleum Regulator for Environment and Decommissioning (OPRED) in October rejected on environmental grounds the development plan for the Jackdaw field, which has reserves of between 120-250 million barrels of oil equivalent.
Shell, which at the time said it was "disappointed" by the decision, has in recent weeks renewed talks with OPRED on a new environmental plan, according to two company sources.
A Shell spokesperson said: "We continue to work with the regulator to explore options around developing the Jackdaw field."
The Department for Business, Energy and Industrial Strategy, under whose umbrella OPRED operates, declined to comment.
British gas prices hit an all-time high above 450 pence per therm in December amid dropping domestic output, low inventories and tensions with Russia. Although they have since dropped to around 180 p/therm they are still more than 3 times higher than a year ago, threatening a cost of living crisis when an energy price cap is lifted in April.
Greg Hands, Minister of State for Energy, Clean Growth and Climate Change said in a Jan. 12 tweet that he had held talks with Shell to discuss the North Sea transition deal and the future of gas production.
The future of the Jackdaw development, pivotal to Shell's plan to develop natural gas output at the Shearwater hub in the central North Sea, was high on the agenda, according to three people close to the discussions.
Shell and OPRED are now attempting to reach an agreement on how to transport natural gas from the Jackdaw field to the St. Fergus onshore terminal near Peterhead in Scotland, according to two sources close to the talks.
The company had planned to extract unwanted CO2 from the gas on the Shearwater platform, burning the unwanted carbon offshore and transporting the treated gas onshore via a newly built pipeline.
OPRED rejected that plan but offered Shell an alternative of transporting the untreated gas via Harbour Energy's nearby Judy field to the St Fergus terminal where the CO2 could be flared, according to the sources.
OPRED's October decision on Jackdaw, which was followed just weeks later by Shell announcing it was also pulling out of the Cambo oilfield project, cast a shadow over the future of the British North Sea's oil and gas industry.
But Kwarteng has said turning off North Sea oil and gas overnight would put energy security, jobs and industries at risk, increasing dependence on foreign imports.
"There has to be a transition, not extinction," he said in a Jan. 18 tweet.
(Reporting by Ron Bousso, Shadia Nasralla, Dmitry Zhdannikov; Editing by Kirsten Donovan)