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Shell takes final investment decision for the Kaikias deep water project in the Gulf of Mexico


WEBWIRE
Kaikias subsea infrastructure
Kaikias subsea infrastructure

Shell Offshore Inc. (Shell), a subsidiary of Royal Dutch Shell plc, and MOEX North America LLC (MOEX NA), a wholly owned subsidiary of Mitsui Oil Exploration Co., Ltd, have each taken the final investment decision to execute phase one of the Kaikias deep-water project in the US Gulf of Mexico. Kaikias is an attractive near-field opportunity with a competitive go-forward break-even price below $40 per barrel. It will produce oil and 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.”

The project will be developed in two phases with phase one expected to start production in 2019. The first phase of development includes three wells, which are designed to produce up to 40,000 barrels of oil equivalent per day (boe/d) at peak rates. 

Kaikias is located in the prolific Mars-Ursa basin approximately 210 kilometres (130 miles) from the Louisiana coast and is estimated to contain more than 100 million barrels of oil equivalent recoverable resources.

Shell is the operator and has an 80% working interest. MOEX NA owns the remaining 20% working interest.

Globally, Shell’s deep-water business is a growth priority for the company and in Q4 2016 produced around 725,000 boe/d. Shell’s deep-water 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-operated projects are currently under construction or undergoing pre-production commissioning: Coulomb Phase 2 and Appomattox. 

Editor’s notes
  • Shell is a leading operator in the Gulf of Mexico with significant acreage, seven production hubs, and an established network of subsea infrastructure.
  • Kaikias phase one will produce oil and gas from three wells back to the nearby Ursa production hub using a single flowline.
  • Shell minimised the need for new drilling at Kaikias by safely re-developing the exploration and appraisal wells for production.
  • Kaikias makes use of a simplified design resulting in approximately 50% reduction in total costs versus initial estimates.
  • By taking advantage of existing oil and gas processing equipment on Ursa, Shell minimised the need for additional top-side modifications and will reduce operating costs at the asset.

See the history of the Kaikias field and it’s expected contribution to Shell’s deepwater operations: Story of the Kaikias field (video)

Cautionary Note

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This release contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this release, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. There can be no assurance that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this release are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s 20-F for the year ended December 31, 2015 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward looking statements contained in this release and should be considered by the reader. Each forward-looking statement speaks only as of the date of this release, February 28 2017. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this release. 

With respect to operating costs synergies indicated, such savings and efficiencies in procurement spend include economies of scale, specification standardisation and operating efficiencies across operating, capital and raw material cost areas. We may have used certain terms, such as resources, in this release that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov.


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