Royal Dutch Shell on Tuesday announced the company has approved production of a new project in the Gulf of Mexico.
Shell Offshore, a subsidiary of the Dutch giant, and a partner have taken final investment decisions on the Kaikias project, in the prolific Mars-Ursa basin about 130 miles off the Louisiana coast. Shell estimates Kaikias holds more than 100 million barrels of recoverable oil and gas. Production should start in 2019.
Deep water drilling continues to struggle after the crash in oil prices, but Shell said on Tuesday that Kaikias will be competitive even with U.S. crude hovering just below $55 per barrel. The field will initially produce 40,000 barrels of oil and gas per day out of three wells at a break-even cost of below $40 per barrel, Shell said.
The company cut costs in half by reusing already-drilled exploration and appraisal wells and tying pipelines back to existing projects.
“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.”
Shell is the operator and has an 80 percent working interest. Partner MOEX North America, a subsidiary of Tokyo-based Mitsui Oil Exploration Co., owns the remaining 20 percent.
Shell said in its announcement that it hopes to grow deep water production from 725,000 barrels of oil and gas per day to more than 900,000 by 2020.
In the Gulf of Mexico, Shell is now developing two other projects, Coulomb Phase 2 and Appomattox.