Shell sanctions PowerNap subsea tieback in the Gulf of Mexico

PowerNap subsea tieback layout.
PowerNap subsea tieback layout.
Shell

PowerNap is in the Mississippi Canyon area of the deepwater Gulf of Mexico.PowerNap is in the Mississippi Canyon area of the deepwater Gulf of Mexico.ShellOffshore staff

HOUSTON – Shell Offshore Inc. has taken the final investment decision (FID) to develop the PowerNap field in the deepwater US Gulf of Mexico.

Discovered in 2014, PowerNap will be developed as a subsea tieback to the Shell-operated Olympus production hub, which is co-owned by BP Exploration and Production Inc. (28.5%). The field is in the south-central Mississippi Canyon area about 240 km (150 mi) from New Orleans in about 1,280 m (4,200 ft) of water.

The project is expected to start production in late 2021 and produce up to 35,000 boe/d at peak rates.

Production will be transported to market on the Mars pipeline, which is operated by Shell Pipeline Co. LP and co-owned by Shell Midstream Partners, L.P. (71.5%) and BP Midstream Partners LP (28.5%).

According to Shell, the project is anticipated to have a forward-looking breakeven price of less than $35/bbl and is currently estimated to contain more than 85 MMboe recoverable resources.

Michael Murphy, research analyst, Gulf of Mexico, Wood Mackenzie, said: this FID “reflects a broader trend of majors embracing subsea tiebacks that offer quicker paths to first oil and attractive returns. We estimate the PowerNap field to have a development breakeven in the low $30’s/bbl.

“This comes on the heel of Shell bringing the Kaikias subsea tieback online in 2018, with an estimated development breakeven in the low $30’s/bbl, and BP entering into the [LLOG-operated] Nearly Headless Nick tieback expected to come online by the end of 2019, just a year after discovery.”

He added: “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 $30’s, the sanctioning of subsea tiebacks is proving that deepwater can compete with tight oil.”

08/01/2019



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