Shell to build another massive Gulf of Mexico oil platform

Royal Dutch Shell announced on Wednesday it will build a deepwater platform in the Gulf of Mexico for its Appomattox field discovery with an estimated startup close to 2020.

Shell said it authorized the major project after finding 20 percent in cost reductions and determining that it will produce a profit as long as the global benchmark for oil prices stays above $55 a barrel. International benchmark crude was priced at more than $62 a barrel early Wednesday.

“Appomattox opens up more production growth for us in the Gulf of Mexico, where our production last year averaged about 225,000 (barrels of oil equivalent) per day, and this development will be profitable for decades to come,” said Marvin Odum, Shell Upstream Americas director in a prepared statement. “With its competitive cost and design, Appomattox is next in our series of deep-water successes.”

The project would become Shell’s eighth and largest floating platform in the Gulf of Mexico. The Civil War-themed Appomattox development, which was discovered in 2010, would initially produce from the Appomattox and Vicksburg fields with average peak production estimated to reach 175,000 barrels of oil equivalent a day.

Shell will have a 79 percent ownership of the platform and the Appomattox and Vicksburg fields, and the remaining 21 percent will be owned by a subsidiary of the state-owned China National Offshore Oil Corp., or CNOOC. The discovery is about 80 miles off the coast of Louisiana.

Shell said it found cost reductions through supply chain savings, design improvements and by reducing the number of wells required for the development. The project will include a semi-submersible, four-column platform, a subsea system featuring six drill centers, 15 producing wells and five water-injection wells.

Shell added that the development of its nearby discoveries at the Gettysburg and Rydberg prospects remains under review. But the company noted that the prospects could become additional tiebacks to Appomattox, bringing the total estimated discovered resources in the area to more than 800 million barrels of oil equivalent.

Shell will build a 24-inch corridor pipeline, called the Mattox Pipeline, which will transport crude oil from the Appomattox host to an existing offshore structure and then connect onshore.