Shell to Focus on Mexico Deep-water

Source: Reuters 11/11/2014, Location: South America

Royal Dutch Shell, one of the world's largest oil companies, is most interested in new oil and gas projects in the deep waters of the Gulf of Mexico following a major sector opening finalized earlier this year, a top executive said.

In the near term, Shell is eying potential deep water tie-ups with Mexican oil company Pemex in the Trion and Exploratus fields located within the Perdido Fold Belt, which straddles the U.S.-Mexico maritime border in the Gulf. "I get very enthusiastic about that because I see huge potential there," Marvin Odum, Shell's upstream Americas director, told Reuters in an interview.

The energy reform signed into law in August promises to stem a decade-long slide in crude output in Mexico, where production hovers around 2.35 million barrels per day (bpd). Pemex has said it will seek to operate the smaller Exploratus field along with other partners, while it seeks a private partner to operate Trion.

Odum said Shell, the top deep water producer in U.S. territorial waters of the Gulf at about 400,000 bpd, would be open to either arrangement. He said yet-to-be determined fiscal terms of the projects will be "the No.1 issue for us” as Shell evaluates investment opportunities. Mexico’s finance ministry will set those terms next year. Odum, also a member of Shell’s executive committee that makes investment decisions, noted that the government take in deep waters of the U.S. Gulf averages between 47 to 53 percent of a project's revenue, and that projects on the Mexican side would need to be competitive to make the cut.

He added that the Perdido Fold Belt’s extension into Mexico offers very similar geology to several U.S. fields Shell currently operates nearby. "You would expect (the Perdido geology in Mexico) to be a very direct analog," he said.

The executive added that the company’s network of platforms and pipelines on the U.S. side of the Gulf could allow for would-be Mexican production to be processed there at considerable savings. "The ability to tie-back and produce more resources through the same structure is a huge benefit," he said, referring to hoses that link new wells to a platform that separates out crude, water and gas.


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