Royal Dutch/Shell is to go ahead with the world's deepest offshore oil and gas production facility, pushing the boundaries of industry technology to drill almost 1.9 miles underwater in the Gulf of Mexico.
The project go-ahead demonstrates Shell's confidence in pricey offshore projects despite a recent downturn in oil prices and comes a day after Exxon Mobil Corp said it would be starting on a $4 billion project to develop the Julia oilfield, also in the Gulf of Mexico.
Last month, BP decided to delay development of its biggest new Gulf of Mexico project, Mad Dog Phase 2, citing tough market conditions and fast-rising costs.
Shell's 100 percent-owned Stones field was discovered in 2005 some 200 miles southwest of New Orleans and encompasses eight lease blocks in the Gulf of Mexico's Lower Tertiary geologic trend — one which produced the Anglo-Dutch oil company's Perdido development.
Perdido, at 9,365 feet below the surface, is the world's deepest offshore well. The Stones field is deeper, at 9,500 feet (2,896 meters).
Production during the first phase of Stones is expected to have an annual peak of 50,000 barrels of oil equivalent per day, Shell said in a statement.
Shell will build a floating production, storage, and offloading (FPSO) vessel and subsea infrastructure — the company's first in the Gulf of Mexico, even though such vessels are an increasingly common sight in newer oil provinces.
Shell and others have traditionally used moored platforms in the Gulf of Mexico because of the well-developed pipeline infrastructure, but as fields are developed deeper and further from land, pipelines are becoming an expensive option, and the storage and tanker offtake model offered by FPSOs is being considered more widely.
The FPSO will be able to "weathervane" in the wind to reduce stress on the structure. It will be moored using a lightweight combination of polyester rope and chain. At a later stage, a new generation of super-efficient sea floor pumping technology will be used.
"This important investment demonstrates our ongoing commitment to usher in the next generation of deepwater developments, which will deliver more production growth in the Americas," said John Hollowell, Executive Vice President for Deepwater, Shell Upstream Americas.
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