Shell approves final investment decision on Appomattox in Gulf of Mexico

Royal Dutch Shell has given the final green light for investment in the Appomattox deepwater development, its largest floating platform in the Gulf of Mexico.

Shell announced the final investment decision (FID) had been made to advance Appomattox, a 79%-owned project discovered in 2010 that is estimated to generate average peak production of roughly 175,000 barrels of oil equivalent (boe) per day. Shell's total Gulf of Mexico production was 225,000 boed in 2014.

The platform will access the Appomattox and Vicksburg fields, 650m boe resources with start-up estimated "around the end of this decade".

Shell has recently made discoveries nearby at the Gettysburg and Rydberg prospects, which could become additional tiebacks to Appomattox, bringing the total estimated discovered resources in the area to more than 800m boe.

The project breakeven price is estimated to be around $55 per barrel Brent equivalent, after Shell shaved the total project cost for Appomattox thanks to supply chain savings, design improvements, and by reducing the number of wells required for the development.

Shell, whose partner in the platform and the Appomattox and Vicksburg fields is Nexen Petroleum Offshore USA, a wholly-owned subsidiary of China's state-run CNOOC, also said its pipeline arm has made a final investment decision on the Mattox Pipeline, a 24-inch corridor pipeline that will transport crude oil from the Appomattox host to an existing offshore structure in the South Pass area and then connect onshore through an existing pipeline.

Analysts at RBC reiterated a recent view that this project will be one which "will help drive Shell's presence in the Gulf of Mexico materially by 2020. This, coupled with Shell's newly acquired assets in the Santos Basin should cement its position as a leader in Deepwater development, in our view."

The Canadian bank has a target price of 2,250p on the shares.

At 15:08, Shell shares were up 1% at 1,825.00p.