Press

Shell Adds Competitive, Deep-Water Production in the U.S. Gulf of Mexico


Shell Offshore, Inc. (Shell), a subsidiary of Royal Dutch Shell plc, announces today the early start of production – around one-year ahead of schedule – at the first phase of Kaikias, an economically resilient, subsea development in the US. Gulf of Mexico with estimated peak production of 40,000 barrels of oil equivalent per day (boe/d).

Shell has reduced costs by around 30% at this deep-water project since taking the investment decision in early 2017, lowering the forward-looking, break-even price to less than $30 per barrel of oil.

“We believe Kaikias is the most competitive subsea development in the Gulf of Mexico and a prime example of the deep-water opportunities we're able to advance with our technical expertise and capital discipline,” said Andy Brown, Upstream Director, Royal Dutch Shell. “In addition to accelerating production for Kaikias, we reduced costs with a simplified well design and the incorporation of existing subsea and processing equipment.”

Kaikias is located in the prolific Mars-Ursa basin around 130 miles (210 kilometers) from the Louisiana coast and is owned by Shell (80% working interest), as operator, and MOEX North America LLC (20% working interest), a wholly owned subsidiary of Mitsui Oil Exploration Co., Ltd.

Royal Dutch Shell pioneered the deep-water industry 40 years ago. In the first quarter of 2018, Shell deep water produced around 731,000 boe/d, globally. Over the past four years, the company's sharp focus on competitive growth has led to planned cuts of around 45% on average for both global deep-water unit development and operating costs.

  • Cycle time from discovery to production for Kaikias phase one is less than four-years.
  • The Kaikias development, located in around 4,500 feet (1,372 meters) of water, sends production from its four wells to the Shell-operated (45%) Ursa hub, which is co-owned by BP (23%), Exxon Mobil (16%), and ConocoPhillips (16%). From the Ursa hub, volumes ultimately flow into the Mars oil pipeline.
  • The forward-looking, break-even price presented above is calculated based on all forward-looking costs associated from final investment decision. Accordingly, this typically excludes exploration and appraisal costs, lease bonuses, exploration seismic and exploration team overhead costs. The forward-looking, break-even price is calculated based on our estimate of resources volumes that are currently classified as 2p and 2c under the Society of Petroleum Engineers' Resource Classification System. As this project is expected to produce over multiple decades, the less than $30 per barrel projection will not be reflected either in earnings or cash flow in the next five years.
  • The direct unit operating costs exclude feasibility, research & development, decommissioning & restoration and idle rig expense.
  • The estimated peak production presented above are 100% total gross figures.



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