Shell adds competitive, deep-water production in the US Gulf of Mexico
HOUSTON, May 31, 2018 /PRNewswire/ -- Shell Offshore, Inc. (Shell), a subsidiary of Royal Dutch Shell plc, announces today the early start of production – around one-year ahead of schedule – at the first phase of Kaikias, an economically resilient, subsea development in the US Gulf of Mexico with estimated peak production of 40,000 barrels of oil equivalent per day (boe/d).
Shell has reduced costs by around 30% at this deep-water project since taking the investment decision in early 2017, lowering the forward-looking, break-even price to less than $30 per barrel of oil.
"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. "In addition to accelerating production for Kaikias, we reduced costs with a simplified well design and the incorporation of existing subsea and processing equipment."
Kaikias is located in the prolific Mars-Ursa basin around 130 miles (210 kilometers) from the Louisiana coast and is owned by Shell (80% working interest), as operator, and MOEX North America LLC (20% working interest), a wholly owned subsidiary of Mitsui Oil Exploration Co., Ltd.
Royal Dutch Shell pioneered the deep-water industry 40 years ago. In the first quarter of 2018, Shell deep water produced around 731,000 boe/d, globally. Over the past four years, the company's sharp focus on competitive growth has led to planned cuts of around 45% on average for both global deep-water unit development and operating costs.
EDITORS' NOTES:
- Cycle time from discovery to production for Kaikias phase one is less than four-years.
- The Kaikias development, located in around 4,500 feet (1,372 meters) of water, sends production from its four wells to the Shell-operated (45%) Ursa hub, which is co-owned by BP (23%), Exxon Mobil (16%), and ConocoPhillips (16%). From the Ursa hub, volumes ultimately flow into the Mars oil pipeline.
- The forward-looking, break-even price presented above is calculated based on all forward-looking costs associated from final investment decision. Accordingly, this typically excludes exploration and appraisal costs, lease bonuses, exploration seismic and exploration team overhead costs. The forward-looking, break-even price is calculated based on our estimate of resources volumes that are currently classified as 2p and 2c under the Society of Petroleum Engineers' Resource Classification System. As this project is expected to produce over multiple decades, the less than $30 per barrel projection will not be reflected either in earnings or cash flow in the next five years.
- The direct unit operating costs exclude feasibility, research & development, decommissioning & restoration and idle rig expense.
- The estimated peak production presented above are 100% total gross figures.
| Cautionary Note The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this release "Shell", "Shell group" and "Royal Dutch Shell" are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words "we", "us" and "our" are also used to refer to Royal Dutch Shell plc and its subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities. ''Subsidiaries'', "Shell subsidiaries" and "Shell companies" as used in this release refer to entities over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as "joint ventures" and "joint operations", respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as "associates". The term "Shell interest" is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in an entity or unincorporated joint arrangement, after exclusion of all third-party interest.
This release contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management's expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as "aim", "ambition', ''anticipate'', ''believe'', ''could'', ''estimate'', ''expect'', ''goals'', ''intend'', ''may'', ''objectives'', ''outlook'', ''plan'', ''probably'', ''project'', ''risks'', "schedule", ''seek'', ''should'', ''target'', ''will'' and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this release, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell's products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this release are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell's Form 20-F for the year ended December 31, 2017 (available at www.shell.com/investor and www.sec.gov ). These risk factors also expressly qualify all forward-looking statements contained in this release and should be considered by the reader. Each forward-looking statement speaks only as of the date of this release, May 31, 2018. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this release.
We may have used certain terms, such as resources, in this release that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov.
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