Shell Targets Expansion in Gulf Even After BP Spill

Royal Dutch Shell Plc, Europe’s biggest oil company, plans to expand projects in the deepwater Gulf of Mexico even as BP Plc, once its main European rival, experiences setbacks after the worst oil spill in U.S. history.

Shell has the potential to add output of more than 250,000 barrels of oil equivalent a day in the Gulf by 2015 and beyond, according to Marvin Odum, director of exploration and production at Shell in the Americas.

“In the Gulf of Mexico we’ve increased our efforts in the deepwater in recent years with encouraging results,” Odum said in a video interview posted on the Internet. “The longer-term outlook for deepwater remains positive, despite the current drilling moratorium.”

The U.S. government has introduced a deepwater drilling ban through Nov. 30 after an explosion at the BP-operated Macondo well killed 11 drillers on April 20 and triggered the spill. The Hague-based Shell added more than 500 million barrels of oil equivalent resources in the Gulf in 2009 and 2010.

Shell and Nexen Inc. announced the Appomattox discovery in the deepwater eastern part of the Gulf in March. The partners have partly appraised the field and estimate that it holds more than 250 million barrels of resources, Nexen said yesterday in a statement.

Growth Phase

“Shell is coming into a growth phase with the potential for substantial cash generation,” said Richard Griffith, a London-based analyst at Evolution Securities Ltd. “BP, while recovering from Macondo, may also be selling more assets in anticipation of having to spend more to rebuild its portfolio.”

Shell has six recent exploration discoveries in the Gulf that may allow it to “extend production to the 250,000 barrels a day level for quite some time to come,” Simon Henry, the chief financial officer at Shell, said in a separate video interview. “Our portfolio here is entering what we believe is a new and really exciting growth phase.”

The Anglo-Dutch company is evaluating plans for the development of the Cardamom deep discoveries, which may hold 100 million barrels of oil equivalent resources and pump 20,000 barrels a day in the Gulf, Odum said.

Shell pumped about 250,000 barrels a day in deepwater in the Gulf last year, it said in a presentation on its website. The company hasn’t provided details of Gulf production targets and estimates for field output decline because of depletion.

The moratorium has affected Shell’s five floating rigs and four platforms and curbed output by about 8,000 barrels a day through the year, it said in the presentation. Shell yesterday approved Mars B platform development, which will pump about 100,000 barrels of oil equivalent a day after 2014, it said.

BP also holds a stake in Mars B in the Gulf, which accounts for more than 10 percent of the London-based company’s output. A probe into the oil spill by U.S. Attorney General Eric Holder may lead to the suspension of BP’s operating licenses, while U.S. lawmakers have threatened to bar the company from new offshore leases because of its safety record.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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