June 15 (UPI) -- Offshore field services company Subsea 7 said Friday it won a contract from Shell to help advance a redesigned concept for the Vito field in the Gulf of Mexico.
Royal Dutch Shell estimates Vito has recoverable resources of 300 million barrels of oil equivalent. Peak production of 100,000 boe per day is expected. In 2015, the Dutch supermajor started a design overhaul that reduced field development costs by about 70 percent through work with vendors like Subsea 7.
Subsea 7 said the contract value is between $50 million and $150 million.
"This award will draw on our expertise to ensure our client is given the competency, cost-efficiency and project capability they need to unlock the full potential of this significant deepwater development," Craig Broussard, the company's vice president for the Gulf of Mexico, said in a statement.
Subsea 7 has said that a period of lower crude oil prices has stimulated industry-wide efforts to become more innovative and efficient.
Development of the Vito prospect will consist of eight wells. Shell estimates the project will break even so long as the price of oil is above $35 per barrel. Brent, the global benchmark for the price of oil, was trading at around $75 per barrel early Friday.
The U.S. Energy Information Administration estimates average total U.S. oil production in the first quarter was 10.24 million barrels per day. The Gulf of Mexico represents about 15 percent of that total and production is estimated to increase from an average 1.74 million bpd to 1.85 million bpd in 2018.
Subsea 7 reported first quarter revenues of $809 million, down about 10 percent from the same period last year. Companies like Subsea 7 were under pressure from lower crude oil prices and started looking at joint ventures to weather the market storm.
Subsea 7 and Schlumberger, the largest services firm in the world, formed a joint venture partnership in February that was based on a 2015 arrangement to coordinate broad offshore development work under one umbrella. Subsea 7's move to acquire rival McDermott International was rejected.