Shell platform in Gulf starts production early
Royal Dutch Shell said Thursday it has begun production at its massive new Appomattox platform in the deepwater Gulf of Mexico a few months ahead of schedule.
The Appomattox — the only major platform coming online this year in the Gulf — is expected to produce 175,000 barrels of oil equivalent a day from its position about 80 miles southeast of the Louisiana coastline. It’s the first large-scale production tapping into a Gulf formation known as the Norphlet.
Shell made the decision to authorize and build the project back in 2015 during the most recent oil bust. The Appomattox originally wasn’t expected to start production until this fall.
The offshore industry has been slow to rebound since the last price collapse — much slower than the onshore shale sector. But activity in the Gulf of Mexico has picked up in recent months with new investments and discoveries, albeit with
fewer players.
Since the oil bust ended in 2016, only two other major Gulf platform projects have moved forward, including Shell’s Vito project, which was authorized last year. BP also is building the Mad Dog Phase 2 project. The Vito decision is considered by analysts as a sign that the long-languishing offshore sector is showing signs of life as oil prices hover near $60 per barrel.
Crude settled Thursday at $57.91 a barrel after losing 6 percent in the biggest sell-off of the year.
Shell sees the Appomattox as a major hub to build other expansions in the region. Last year, Shell announced the Dover discovery near the Appomattox. That means the new discovery can be drilled and developed through connections, called tiebacks, to the Appomattox to save costs, rather than build a new platform.
The Dover discovery is Shell’s sixth in the Norphlet region of the
Gulf.
“Appomattox creates a core long-term hub for Shell in the Norphlet through which we can tie back several already-discovered fields as well as future discoveries,” said Andy Brown, Shell’s upstream director.
The Appomattox is named after the Virginia courthouse where Confederate Gen. Robert E. Lee surrendered in 1865, essentially ending the Civil War. Shell views the project as a milestone for an industry that needed to adjust its approach and make deepwater projects more affordable and competitive in the lower oil price environment. The U.S. shale industry, especially West Texas’ Permian Basin, is booming with faster and cheaper projects, siphoning investment from the Gulf of Mexico and other parts of the world.
Shell said it cut 20 percent off the price tag before approving the Appomattox in 2015. More than 20 percent in additional cuts came afterward. The Anglo-Dutch oil major declined to disclose the project costs, but said it sliced billions of dollars from the original price.
The platform hull was built in South Korea and shipped to Texas during a multiweek journey that ended in October 2017 — not long after Hurricane Harvey ravaged the area. The topside portions were built in Texas, Louisiana and Alabama and pieced together in Ingleside near Corpus Christi.
Shell owns about 79 percent of the Appomattox project. The remaining 21 percent is held by a subsidiary of the state-owned China National Offshore Oil Corp., or CNOOC.