Infrastructure-Led Exploration Reducing Offshore Pipeline Demand
HOUSTON (P&GJ) — Shell's announced plan to develop the PowerNap deepwater project in the U.S. Gulf of Mexico reflects a broader trend toward "infrastructure-led exploration" that weakens demand for the construction of new subsea export pipelines.
Recent exploration shows majors have adopted a complementary strategy of pursuing both traditional large prospects and infrastructure-led exploration. The overall trend, however, is toward longer subsea tie-backs to existing infrastructure, according to Michael Murphy, Gulf of Mexico research analyst for Wood Mackenzie.
Shell’s final investment decision for PowerNap reflects a "trend of majors embracing subsea tie-backs that offer quicker paths to first oil and attractive returns," Murphy said.
Further illustrating the deepwater Gulf of Mexico trend, Shell brought the Kaikias subsea tie-back online in 2018, and BP's Nearly Headless Nick tie-back is expected to come online by the end of 2019, just a year after its discovery.
“With internal rate of returns above 30% and development breakeven in the low-to-mid US$30’s, the sanctioning of subsea tie-backs is proving that deepwater can compete with tight oil,” Murphy said.
WoodMac estimates development breakeven for Shell's PowerNap and Kaikias programs to be in the "low US$30’s per barrel.”
Related News
Related News
- Trump Aims to Revive 1,200-Mile Keystone XL Pipeline Despite Major Challenges
- Phillips 66 to Shut LA Oil Refinery, Ending Major Gasoline Output Amid Supply Concerns
- Valero Considers All Options, Including Sale, for California Refineries Amid Regulatory Pressure
- ConocoPhillips Eyes Sale of $1 Billion Permian Assets Amid Marathon Acquisition
- ONEOK Agrees to Sell Interstate Gas Pipelines to DT Midstream for $1.2 Billion
- U.S. LNG Export Growth Faces Uncertainty as Trump’s Tariff Proposal Looms, Analysts Say
- Tullow Oil on Track to Deliver $600 Million Free Cash Flow Over Next 2 Years
- Energy Transfer Reaches FID on $2.7 Billion, 2.2 Bcf/d Permian Pipeline
- GOP Lawmakers Slam New York for Blocking $500 Million Pipeline Project
- Polish Pipeline Operator Offers Firm Capacity to Transport Gas to Ukraine in 2025
Comments