The Houston-based U.S. subsidiary of Royal Dutch Shell Plc is moving forward with a new deepwater oil and gas exploration development in the U.S. Gulf of Mexico, the 12th in its portfolio.
Houston-based Shell Offshore made its final investment decision for Whale, a deepwater oil and gas platform about 200 miles southwest of Houston. Shell estimated it could hit peak production of 100,000 barrels daily until it runs dry around the 490 million barrel mark. At the same time, the project is expected to use more energy-efficient gas turbines in the process as it begins production in 2024.
Whale is similar in design to its other next-generation project, Vito, which sits 150 miles southeast of New Orleans and is expected to produce 100,000 barrels of oil per day and 300 million before it likely runs out. Vito was touted as an oil platform that could break even with oil prices under $35 per barrel.
The company has been working on streamlining and simplifying its offshore oil platform construction and operations so it can continue drilling profitably even when oil prices vary widely. For example, Whale is expected to have an internal rate of return higher than 25% for the project. Shell owns 60% of the development and will be the operator while Chevron USA controls the remaining 40% stake.
In 2020, Shell drilled 137.7 million barrels of crude oil across the Gulf of Mexico as the most prolific operator in the deepwater oil fields, according to Bureau of Safety and Environmental Enforcement data. That’s less than the 147.3 million barrels the company produced in 2019 because global demand plummeted due to the pandemic-fueled economic recession.
In general, the company has been producing more offshore oil each year, records show. In 2018, it drilled 122.3 million barrels.
Despite headwinds from corporate mandates to reduce carbon emissions, a temporarily halt for new federal leases in the Gulf of Mexico while th…