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  July 20th, 2022 | Written by

Full Steam Ahead for Shell in the Gulf

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The Gulf of Mexico is open for drilling. “Open” is up for interpretation, but Shell PLC has taken the cue from the Biden administration and continues to pour billions of dollars into the region. Their initial investment decision had been made in 2018 but the decision to keep moving forward hinged somewhat on the signals of the Biden administration. In late June a proposal was released by the Interior Department allowing as many as 11 oil lease sales for offshore drilling. The proposal blocks new offshore drilling in the Pacific and Atlantic oceans but will allow limited expansion in Alaska’s south coast and the Gulf of Mexico.

Vito is the name of Shell’s 13th major offshore project in the Gulf. With a total cost of roughly $3 billion, Shell expects Vito to arrive at its destination, 150 miles southeast of New Orleans, by the end of July. From there it will begin to pump gas and oil in waters approximately 4,000 feet deep from eight wells. The larger oil industry had been lobbying Washington for a minimum of two annual lease sales in the Gulf over the next five years. While the administration responded favorably, including one in Cook Inlet, Alaska, officials indicated they could still move to block all new offshore-drilling sales. 

For the oil industry, having continued leasing to maintain its reserves for future production is vital. BP PLC is the Gulf’s second-largest producer and will also be moving forward with its drilling plans. While this is a political issue in many ways, Shell and BP have committed to shifting some of their investment away from fossil fuels and over to lower-carbon energy sources. Shell is planning on decreasing oil production by 1% to 2% per year until 2030, and then using gas and oil profits to spur the development of renewable energy. 

Shell is additionally planning to build smaller, cheaper drilling platforms. Vito, for example, is one-quarter of the size of Appomattox, Shell’s largest floating unit. Vito’s anticipated field life is 25 years. For platforms the size of Appomattox, it is common for the field life to stretch up to 40 years. Vito will be consuming just 40% of the power Appomattox would require and will be pumping for nearly half the years. This will all result in a lighter carbon footprint. 

Vito is expected to be the model moving forward. Shell has already embarked on a similar platform called Whale, expected to be in production in the Gulf, southwest of Houston in 2024. Gulf production from Shell was roughly 558,000 barrels a day in 2021. This was up 12% since 2017.        

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