LONDON – Royal Dutch Shell has postponed decisions on whether to go ahead with two large oil and gas developments in the Gulf of Mexico and North Sea after oil prices collapsed due to the coronavirus crisis, according to a Reuters report.
The Anglo-Dutch company slashed its 2020 spending plans by a fifth as measures to halt the spread of the virus led to an unprecedented drop in oil demand and sent oil prices to their lowest in two decades.
As a result of this, the source said Shell had delayed a final investment decision (FID) to 2021 on whether to develop its Whale discovery in the southern part of the US Gulf of Mexico. A source close to the project said some work on the project continued, according to Reuters.
A decision on Whale was initially planned for later this year, following the discovery in 2017 of what Shell said was one of its biggest finds here in recent years. Shell, the operator of the Whale project, holds 60% in the field, while Chevron holds the remaining 40%.
The project’s pace has slowed and an investment decision has been put off to next year, a Chevron spokeswoman said. The US oil major last month cut its 2020 project budget by $4 billion and suspended share buybacks to save cash.
Shell also decided this month to defer a decision about the Jackdaw natural gas field in Britain’s North Sea, the source said. The development plan originally envisaged linking the field to the existing Shearwater platform by 2024.
The delays come after private-equity backed Siccar Point, Shell’s partner in another North Sea project, Cambo, announced on March 20 that the FID on the field was pushed back to 2021 due to coronavirus.
Shell previously said projects it would develop would be built to generate profit with Brent crude at $30/bbl or more. But the benchmark had hovered around $20/bbl last week.