Shell has decided to move ahead a Gulf of Mexico deepwater project with a break-even price below $40 per barrel.
The oil major took a final investment decision alongside MOEX North America to execute phase one of the Kaikias deepwater project, which will produce gas through a subsea tie-back to the nearby Shell-operated Ursa production hub.
“Kaikias is an example of a competitive and capital efficient deep-water project using infrastructure already in place,” said Andy Brown, upstream director of Royal Dutch Shell.
“The team has done a great job to reduce the total cost by around 50% by simplifying the design and using lessons learned from previous subsea developments.”
Production is expect to start in 2019. The first development phase will include three wells, which are designed to produce up to 40,000 barrels of oil equivalent per day.
Kaikias is located in the prolific Mars-Ursa basin approximately 130 miles from the Louisiana coast. The discovery is estimated to hold more than 100 million barrels of oil equivalent recoverable resources.
It comes after Shell completed the development’s drilling and appraisal program ahead of schedule and under budget. The oil major reported a 20% costs savings in the work execution.
The field was discovered in August 2014, after Shell acquired the lease in December 2012. Kaikias’ development also saw Shell drill its longest well ever to a measured depth of 34,500ft. The appraisal drilling revealed more than 300 feet of net oil pay in August 2015.
Shell is the operator with a 80% working interest. MOEX NA owns the remaining 20% working interest.
Shell has earmarked its deepwater business as “growth opportunity” for the firm. Its deepwater production is expected to increase to more than 900,000 boe/d by 2020 from already discovered, established reservoirs. In the Gulf of Mexico, two other Shell’s Coulomb Phase 2 and Appomattox projects are currently under construction or undergoing pre-production commissioning.