March 27 (UPI) -- In a sign of sector confidence, French energy services company TechnipFMC said it got a contract to help build new production components in the Gulf of Mexico.
After making a final investment decision on the project, a division of Royal Dutch Shell awarded TechnipFMC with a contract to help develop some of the production systems for the first phase of the Kaikias deepwater project in the U.S. waters of the Gulf of Mexico.
The French developer under the terms of the contract said it will provide Shell with cost-efficient subsea equipment "that will enable efficient project execution and maximize production from the field."
Shell announced development plans for Kaikias in February. It's part of the broader Mars-Ursa basin in the Gulf of Mexico and holds an estimated 100 million barrels of recoverable oil and natural gas.
Shell is in the midst of cost-cutting and divestment efforts as it retools in the wake of last year's mega-merger with British energy company BG Group. The respective shareholders at FMC Technologies and Technip in December approved of a merger just as the sector as a whole was recovering on the back of improved crude oil prices.
The price for Brent crude oil was around $50 per barrel early Monday. When oil prices collapsed below $30 per barrel last year, analysis from consultant group Wood Mackenzie found restrictions in financing in the low-price environment would potentially encourage mergers and acquisitions.
The Dutch supermajor said it was able to cut Kaikias development costs in half by re-using some of the regional exploration and appraisal wells and tying pipelines into existing projects.
Production should start in 2019.