Royal Dutch Shell plc announced Monday it has initiated production from its Stones development in the U.S. Gulf of Mexico.
The Stones project – which is expected to produce approximately 50,000 barrels of oil equivalent per day (boepd) once it’s fully ramped up at the end of 2017 – demonstrates Shell’s commitment to its focus on achieving cost savings through innovation and its focus on deepwater, a growth priority for the company, the company said in a Sept. 6 press statement.
Shell is using a floating production, storage and offloading vessel (FPSO) for Stones’ host facility. The development will start with two subsea production wells tied back to the FPSO, following by six additional production wells, Shell stated. The company plans to conduct multiphase seafloor pumping for a later phase to pump oil and gas from the seabed to the vessel, boosting recoverable volumes and production rates.
The FPSO is the thirteenth FPSO in Shell’s global deepwater portfolio and produces through subsea infrastructure beneath 9,500 feet (2,900 meters) of water, making Stones the world’s deepest offshore oil and gas project, Shell said. Stones is Shell’s second producing field from the Lower Tertiary geologic frontier in the Gulf of Mexico. The first field is Perdido, which started producing in 2010.
The Stones development project features a more cost-effective well design, which requires fewer materials and lowers installation costs. This is expected to deliver a reduction in well costs of up to $1 billion once all the producers are completed, Shell said in the release. The FPSO being used can also disconnect and sail away in the event of a storm.
The company is operator of the Stones development with 100 percent interest. Shell also has three other operated projects that are currently under construction or undergoing pre-production commissioning: Coulomb Phase 2 and Appomattox, both in the Gulf of Mexico, and Malikai in Malaysia. Rigzone reported in June that Shell sees the Malaikai project as boosting the company’s deepwater ambitions.
The current oil price downturn is prompting operators to return to the drawing board to redesign projects to make them more competitive in today’s market. Reducing costs to boost economics has allowed Shell to reduce overall capital expenditures from $10 billion to $8 billion, an analyst told attendees at the Offshore Technology Conference earlier this year. Last year, Shell said it would move forward with the Appomattox project after making significant cost cuts to make the project economic at lower oil prices.
In June, Shell said it would limit its capital spending through 2020 and focus on its "cash engine businesses" such as conventional oil and gas to grow its free cash-flow per share to cope with low oil prices. As part of this strategy, Shell said it would give priority to its deepwater and chemicals businesses. Shell’s deepwater assets currently produce 600,000 boepd. Production from these assets is expected to rise to over 900,000 boepd by the early 2020s from already discovered, established reservoirs, the company said in the release.
As part of its focus on deepwater, Shell is continuing to explore the U.S. Gulf of Mexico. In July, the company reported that its Fort Sumter discovery indicates that "running room still exists in Shell’s heartlands acreage" in the deepwater Gulf.
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