Shell has taken the final investment decision (FID) for the PowerNap deepwater project in the US Gulf of Mexico, the supermajor announced on Thursday.
PowerNap, a subsea tie-back to the Shell-operated Olympus production hub, is expected to start production in late 2021 and produce up to 35,000 barrels of oil equivalent per day (boe/d) at peak rates. It is anticipated to have a forward-looking break-even price of less than $35 per barrel and is currently estimated to contain more than 85 million barrels of oil equivalent recoverable resources.
"PowerNap further strengthens Shell’s leading position in the Gulf of Mexico,” said Wael Sawan, Shell’s Upstream Director. “It demonstrates the depth of our portfolio of Deep Water growth options, and our ability to fully leverage our existing infrastructure to unlock value,” he added.
Michael Murphy, a Wood Mackenzie research analyst, Gulf of Mexico, said, “Shell’s final investment decision regarding the PowerNap field reflects a broader trend of Majors embracing subsea tie-backs that offer quicker paths to first oil and attractive returns. We estimate the PowerNap field to have a development breakeven in the low US$30’s per barrel (bbl).”
“This comes on the heel of Shell bringing the Kaikias subsea tie-back online in 2018, with an estimated development breakeven in the low US$30’s/bbl, and BP entering into the Nearly Headless Nick tie-back expected to come online by the end of 2019, just a year after discovery.
“Recent exploration in the region has demonstrated how Majors in the deepwater Gulf of Mexico have adapted a complimentary strategy of pursuing traditional large prospects, in addition to infrastructure-led exploration.
“With internal rate of returns above 30% and development breakeven in the low-to-mid US$30’s, the sanctioning of subsea tie-backs is proving that deepwater can compete with tight oil.”
Shell is currently is the largest leaseholder and one of the leading offshore producers of oil and natural gas in the US Gulf of Mexico where it operates nine production hubs and a network of subsea infrastructure.
Shell discovered PowerNap in 2014. 100% developed by Shell, it is located in the south-central Mississippi Canyon area approximately 240 kilometers from New Orleans in about 1,280 meters water depth.
The Shell-operated (71.5%) Olympus production hub is co-owned by BP Exploration and Production Inc. (28.5%). Production at Olympus began in 2014.
PowerNap production will be transported to market on the Mars pipeline, which is operated by Shell Pipeline Company LP and co-owned by Shell Midstream Partners, L.P. (71.5%) and BP Midstream Partners LP (28.5%).