Gulf subsea development looks to cut oil production costs in half

Don Ames
June 11, 2018 - 7:08 am

Shell Offshore, Inc. has announced early production at a deepwater oil development in the Gulf. 

And, a new extraction method being used at the Kaikias site could be a game changer for the Gulf oil industry.

The project looks to bring in oil from the Gulf at a break-even price of less than $30 per barrel. 

They do it by using hundreds of millions of dollars of pipelines already in place to send oil from new drilling sites to an existing surface platform. That can save the one to three billion dollars it costs to build a new floating platform.

"If they tried to do it the way they would traditionally do it, they'd be spending more like $60 a barrel to get everything installed. So, they've essentially cut the cost and the time in half," says Eric Smith, Interim Director of the Tulane Energy Institute. 

The new method allows a single platform to serve as a hub for a kind of underwater subway system.  

"It's basically the difference between building the subway and building a big subway station like Grand Central every time you go out to build a new facility," says Smith.

"And, it saves them a lot of time on all of the plumbing and all of the capital avoided by not having to build a new floating production system."

"So, rather than having to spend years designing and building a big floating production system, they are tying back the new field to an existing  production platform where they have an equity interest."

According to Shell, the start-up occurred approximately one year ahead of schedule.

Located in the Mars-Ursa basin approximately 130 miles off the Louisiana coast, Kaikias will ultimately send production from four wells - in approximately 4,500 feet of water - to the Shell-operated Ursa hub. From Ursa, which is co-owned by BP, ExxonMobil and ConocoPhillips, production volumes will eventually flow into the Mars oil pipeline.

It's estimated the Kaikias project holds more than 100 million barrels of oil equivalent recoverable reserves. The first phase of the subsea oil and gas development project is designed to produce up to 40,000 barrels of oil equivalent per day at peak rates.

"We believe Kaikias is the most competitive subsea development in the Gulf of Mexico and a prime example of the deep-water opportunities we’re able to advance with our technical expertise and capital discipline," said Andy Brown, Upstream Director, Royal Dutch Shell.

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