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.”