Shell has made a major discovery in the US Gulf of Mexico (GOM), the firm revealed as part of its 1H results this morning.
The firm said initial estimated recoverable resources for the Fort Sumter well is more than 125 MMboe. Further appraisal drilling and planned wells in adjacent structures could considerably increase recoverable potential in the vicinity of the Fort Sumter well.
“The Fort Sumter discovery builds upon Shell’s global deepwater leadership. Its proximity to our nearby discoveries in the area, and to highly prospective acreage to the southeast, makes Fort Sumter particularly significant,” said Ceri Powell, executive vice president exploration. “These successes demonstrate there is still running room in the producing basins of our heartlands where large, high-value discoveries have the potential to further strengthen our deepwater competitiveness.”
Fort Sumter was safely drilled in the Mississippi Canyon Block 566, located approximately 73mi (117km) offshore southeast of New Orleans, in a water depth of 7062ft (2152m) to a total vertical drilling depth of 28,016ft (8539m) measured depth. The block is 9sq mi (23sq km) in size and is operated by Shell (100%). An appraisal sidetrack well was later drilled to a depth of 29,200ft (8900m) measured depth.
Shell’s material discovery builds upon recent Norphlet exploration success at the Appomattox (2010), Vicksburg (2013), and Rydberg (2014) discoveries, bringing the total resources added by exploration in the GOM for Shell since 2010 to around 1.3 billion boe.
Shell global deepwater, which is a growth priority for the company, currently produces around 600,000boe/d, and production is expected to increase to about 900,000boe/d by the early 2020s from already discovered, established reservoirs.
Already released during the 1H results announcement, Shell's production rose 28% to 3.5 MMboe/d in Q2 2016, compared to the same period in 2015, aided by the BG Group acquisition.
But, the firm has also been hit by a tide of attacks on oil facilities offshore Nigeria. Shell says, compared with Q3 2015, upstream earnings are expected to be negatively impacted by a reduction of some 35,000 boe/d associated with sabotage incidents and repairs in Nigeria. Earnings could be further impacted if the security conditions continue to deteriorate, the firm added. Two Eni workers were killed in early July in an attack by militants in the Niger Delta. Read our special report here.
Excluding the BG Group acquisition, the Nigeria unrest and other items, production rose 2%, Shell said.
Continuing low oil prices - averaging US$46/bbl a day in 1H 2016 - also hurt Shell's results. "Lower oil prices continue to be a significant challenge across the business, particularly in the upstream," says CEO Ben van Beurden.
Q2 current cost of supplies earnings were $0.2 billion, compared with $3.4 billion for Q2 2015, a 94.1% drop.
Shell is on track to deliver $40 billion underlying operating cost run rate at the end of 2016, says van Beurden. The firm has also cut capital investment, which is expected to be $29 billion for the full year, compared to $47 billion in 2014.
Excluding the BG Group acquisition, the Nigeria unrest and other items, production rose 2%, Shell said.
Image: Ben van Beurden/Shell
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