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Shell to develop PowerNap deepwater project in US Gulf of Mexico

Shell has announced that it will develop its PowerNap deepwater project in the US Gulf of Mexico, capitalizing on nearby existing infrastructure.

The company will develop the project as a subsea tie-back to the Shell-operated Olympus production hub, which began operations in 2014.

“Shell’s final investment decision regarding the PowerNap field reflects a broader trend of majors embracing subsea tie-backs that offer quicker paths to first oil and attractive returns,” Michael Murphy, Research Analyst, Gulf of Mexico, Wood Mackenzie, said. 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 tie-back online in 2018, with an estimated development breakeven in the low $30’s/bbl, and BP entering into the Nearly Headless Nick tie-back expected to come online by the end of 2019, just a year after discovery.

“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,” Mr Murphy added. “With internal rate of returns above 30% and development breakeven in the low-to-mid $30’s, the sanctioning of subsea tie-backs is proving that deepwater can compete with tight oil.”

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