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Shell to tap new Gulf of Mexico oil

Investment decision comes one day after federal permit decision for arctic operations.

By Daniel J. Graeber
Shell makes investment decision to proceed with new developments in the deep waters of the U.S. Gulf of Mexico at a time when industry peers are trimming expenses. File photo by Maryam Rahmanian/UPI
Shell makes investment decision to proceed with new developments in the deep waters of the U.S. Gulf of Mexico at a time when industry peers are trimming expenses. File photo by Maryam Rahmanian/UPI | License Photo

HOUSTON, July 1 (UPI) -- Royal Dutch Shell said Wednesday it made a final investment decision to open up new oil developments in the deep waters of the U.S. Gulf of Mexico.

Shell said it was moving forward with a decision to build what it says will be the largest floating platform in the Gulf of Mexico in order to tap into the deepwater Appomattox prospect. Average production is expected to be about 175,000 barrels of oil equivalent per day.

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"Appomattox opens up more production growth for us in the Gulf of Mexico, where our production last year averaged about 225,000 boe per day, and this development will be profitable for decades to come," Upstream Director Marvin Odum said in a statement. "With its competitive cost and design, Appomattox is next in our series of deep-water successes."

Shell is moving forward with the investment decision at a time when its industry peers are trimming expenses in order to cope with a weak market for crude oil. Low crude oil prices means less spending for oil and gas exploration, though Shell said it should break even at Appomattox with Brent crude oil priced at around $55 per barrel, about 12 percent less than the price for Wednesday.

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Shell's investment decision comes one day after it received a federal permit for drilling operations in the arctic waters off the coast of Alaska, but with important restrictions.

The company is proposing as many as six wells in a region known as the Burger prospect, located in shallow waters, using the Noble Discoverer and Polar Pioneer rigs. A permit from the Fish and Wildlife Service gives Shell permission to drill in the maritime environment, but limits operations to one drilling operation at a time.

The federal decision gives Shell a minor victory in that it can proceed in the arctic climate, but limits the scope of its ambitions. Environmental campaigners have worked to thwart Shell's arctic plans out of concern for the region's pristine ecosystem.

Shell holds a majority stake in the Appomattox project, which includes Chinese investors.

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