Shell OKs deep-water project in the Gulf

Company authorizes platform southeast of New Orleans

Royal Dutch Shell says it's authorizing the multibilliondollar Vito project in the deep-water Gulf of Mexico — the first oil platform project approved in the Gulf since 2016.

Royal Dutch Shell said Tuesday it's authorizing the multibillion-dollar Vito project in the deep-water Gulf of Mexico — the first oil platform project approved in the Gulf since 2016.

Although the offshore energy sector continues to languish after the recent oil bust, Big Oil companies like Shell are beginning to move forward with new projects at dramatically lower costs as they simplify designs, use offthe-shelf parts, squeeze discounts from contractors and drill more efficiently. While Shell won’t reveal the project’s price tag, the company said it cut the Vito cost estimate by 70 percent from the initial design.

Kurt Shallenberger, Shell's Vito project manager, said the decision to move forward marks a pivotal moment in the deep-water sector that is seeking to become competitive with onshore shale drilling and make money at lower prices.

“Not about going deeper, but making it affordable and repeatable,” Shallenberger said.

The decision to build the fourcolumn semi-submersible platform and the underwater system to develop eight wells comes just before Shell launches the Appomattox platform into the Gulf from its current docking point

Corpus Christi. Appomattox — soon to be Shell’s largest floating Gulf platform — was the first Gulf platform project approved since oil prices crashed from the 2014 days of $100 per barrel oil. That decision came in 2015.

The last time a Gulf platform project was authorized was BP’s $9 billion, Mad Dog 2 project in December 2016, said Justin Devery, the Gulf of Mexico energy researcher for IHS Markit. Other Gulf deep-water projects approved since then are all socalled tieback developments that connect new wells to nearby platforms to cut costs.

Devery said Chevron likely is next on deck to decide whether to move ahead with major projects with its still-pending Tigris and Anchor platforms.

Shell said Vito is designed to remain profitable with oil prices close to $35 a barrel. Oil prices currently are hovering near $70 a barrel.

“With a lower-cost developmental approach, the Vito project is a very competitive and attractive opportunity industrywide,” said Andy Brown, Shell upstream director. “Our ability to advance this world-class resource is a testament to the skill and ingenuity of our development, engineering and drilling teams.”

The Vito field, about 150 miles southeast of New Orleans, is more than 4,000 feet deep. Shell owns more than 63 percent of the project, while Norway-based Statoil holds the remaining 36.9 percent.

The project is expected to begin oil production in 2021 and churn out 100,000 barrels of oil equivalent a day. Shell estimates the Vito field has more than 300 million barrels of oil equivalent in recoverable resources.

Shell has two other Gulf projects under construction — Kaikias and Coulomb Phase 2 — both of which are tieback develnear opments.

Earlier this year, Shell said it made a discovery in the western Gulf of Mexico with Chevron. The Whale discovery is about 200 miles south of Houston, Shell said. The area is about 10 miles from Shell's massive Perdido platform, so the hope is Shell can develop the area and save money while connecting it to the existing platform and pipelines.