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Shell Kick-Starts Production in Kaikias with 30% Lower Costs


May. 31 2018, Published 10:14 a.m. ET

Shell’s Kaikias project begins production

Royal Dutch Shell (RDS.A) has begun production at its Kaikias phase-one project in the US Gulf of Mexico. The project came into production a year ahead of schedule and with 30% lower-than-estimated cost—a remarkable achievement. The Kaikias project started production within four years of its discovery. Plus, with the reduction in costs, Shell expects the project to break even at a crude oil price of less than $30 per barrel.

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The field is located in around 4,500 feet of water in the Mars-Ursa basin. The production from the four wells is to travel to the Ursa hub, where it should enter the Mars pipeline. The field is expected to have peak production of around 40 thousand barrels of oil equivalent per day or Mboepd. Shell operates the field with an 80% stake. The other 20% is owned by MOEX North America , a subsidiary of Mitsui Oil Exploration.

Shell’s upstream portfolio

The production from the Kaikias project showcases Shell’s deep-water expertise. Also, in the past four years, with a constant endeavor to reduce costs, Shell has been able to sharply reduce its worldwide deep-water unit development as well as operating costs.

Shell produced around 731 Mboepd from its deep-water assets globally in the first quarter. The company’s total production from its global operations stood at 3.8 MMboepd (million barrels of oil equivalent per day) in the first quarter. ExxonMobil (XOM) produced 3.9 MMboepd. Chevron (CVX) and BP’s (BP) production stood at 2.9 MMboepd and 2.6 MMboepd, respectively.

Shell (RDS.A) expects more than 15 projects globally to contribute more than 700 Mboepd of new production net in 2018–2019, including Kaikias. Shell also has projects under construction that are expected to deliver more than 200 Mboepd of new production by 2020.


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