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Wednesday, June 26, 2019

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Major Gulf oil project moves forward

Major Gulf oil project moves forward

Shell Offshore has decided to move forward with a major new oil development in the deepwater Gulf of Mexico.

The Vito project will produce oil from a field in 4,000 feet of water about 150 miles southeast of New Orleans, the company says.

The project is significant for several reasons:

It is the first new oil development sanctioned this year in the Gulf.

It comes amid an offshore oil bust, sparked initially by a global crude glut and resulting decline in prices, that has lasted nearly four years, stripping roughly 16,000 jobs from Houma-Thibodaux’s oil-based economy.

Shell says efficiencies, including a redesign of Vito’s above-surface production platform, have driven down the project’s break-even cost to about $35 a barrel. That’s down by about 70 percent since Shell conceived the project. It’s also down significantly from $60 or $70 a barrel economists and analysts have widely touted as the break-even oil price in the deepwater Gulf over the past several years.

“With a lower-cost developmental approach, the Vito project is a very competitive and attractive opportunity industry-wide,” Andy Brown, Shell Upstream director, said in a news release last week. “Our ability to advance this world-class resource is a testament to the skill and ingenuity of our development, engineering and drilling teams.”

Vito, Shell’s 11th deepwater project in the Gulf, is scheduled to begin producing oil in 2021. At its peak, the project will produce about 100,000 barrels of oil per day. Total recoverable oil is estimated at 300 million barrels over several decades. Shell owns 63 percent and Statoil USA owns the other 37 percent.

Company officials attribute Vito’s cost savings to simplified design, in addition to “working collaboratively with vendors in a variety of areas including well design and completions, subsea, contracting and topsides design.”

Vito is an example of a trend Louisiana economist Loren Scott discussed during a speech April 17 in Houma before the South Central Industrial Association.

Efficiencies that have brought down the break-even point for Gulf projects have come at a cost to many of the oilfield service companies and workers based in Terrebonne and Lafourche parishes. As oil companies become more efficient, they have demanded lower prices from service businesses and suppliers and often need fewer platforms, service boats and workers, Scott said.

Most of the relatively few leases companies purchased during the latest Gulf sale in March are close to current platforms. That allows firms to drill several subsea wells and connect them via pipeline to existing platforms rather than building new ones, costing area companies business and local communities jobs.

Vito’s platform will connect via pipeline to eight subsea wells that will extract oil from thousands of feet below the Gulf floor.

Project manager Kurt Shallenberger calls Vito a “pivotal moment” in the deepwater Gulf.

“But not about going deeper, but making it affordable and repeatable,” he said.

Executive Editor Keith Magill can be reached at 857-2201 or Follow him on Twitter @CourierEditor.