Shell Approves New Gulf of Mexico Project

Posted by Michelle Howard

Royal Dutch Shell has given the go-ahead to develop
its Kaikias deepwater field in the Gulf of Mexico, the first such
project the oil and gas company has approved in 18

Oil companies around the world are emerging from one of the
longest downturns in recent decades amid warnings that the drop
in investment in recent years may lead to a supply deficit by the
end of the decade.

Shell said the Kaikias oil and gas project, located some 210
kilometres (130 miles) from the Louisiana coast, will start
production in 2019 and generate profits with oil prices lower
than $40 a barrel after the company slashed its costs by around
50 percent due to simplified design plans.

Oil prices were around $56 a barrel on Tuesday.

Shell significantly increased its oil and gas production capacity
following the $54 billion acquisition of BG Group a year ago.

Kaikias will be tied into the nearby Shell-operated Ursa
production hub, a key factor in contributing to the projects

The project is estimated to contain more than 100 million barrels
of oil equivalent recoverable resources.

The Anglo-Dutch company holds an 80 percent interest in the
project, while Japan's Mitsui holds the remaining 20 percent. The
cost of the development was not disclosed.

It will be developed in two phases, Shell said. The first phase
includes three wells which are designed to produce up to 40,000
barrels of oil equivalent per day at its peak.

This is Shell's first new oil and gas project final investment
decision since July 2015, when it gave the go-ahead for the
Appomattox deepwater project also in the Gulf of Mexico.

Consultancy Wood Mackenzie said last month that oil and gas
companies would increase spending in 2017 and more than double
new project developments as they gain confidence that a two-year
oil price slump is behind them.

(Reporting by Ron Bousso)

Feb 28, 2017

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