Shell Starts Deepwater Gulf of Mexico Oil Project

Shell said on Thursday it had started early production at a deepwater subsea development in the US Gulf of Mexico a year ahead of schedule and at a forward-looking, breakeven price of less than $30 per barrel of oil. The company began early production at the Kaikias development that has an estimated peak production of 40,000 barrels of oil equivalent per day, adding more production in its key deepwater focus area, the Gulf of Mexico, Oil Price reported.

Shell made the investment decision on the project early last year and has reduced costs at the development by some 30% since then, the supermajor said in a statement.

“We believe Kaikias is the most competitive subsea development in the Gulf of Mexico and a prime example of the deep-water opportunities we are able to advance with our technical expertise and capital discipline,” said Andy Brown, upstream director of Royal Dutch Shell. The Kaikias development, which took less than four years from discovery to phase one production, is located in the Mars-Ursa basin around 130 miles from the Louisiana coast.

Kaikias sends output from its four wells to the Shell-operated Ursa hub, and ultimately into the Mars oil pipeline.

Just last week, Shell said it had made a large deepwater exploration discovery in the US Gulf of Mexico, just 13 miles from its Appomattox project that is expected to start production by the end of 2019.  The Dover discovery, Shell’s sixth in the Norphlet geologic play in the US Gulf of Mexico, is considered an attractive potential tieback due to its proximity to Appomattox.

The Appomattox project is planned to have a peak annual production of 175,000 barrels of oil equivalent per day.

At the end of April, Harry Brekelmans, Shell projects and technology director, said the oil major is targeting deepwater projects to break even at $40 or preferably below that threshold.