OREANDA-NEWS. Shell has made a final investment decision (FID) on the Appomattox deepwater development project in the US Gulf of Mexico, where the company expects production to peak at 175,000 b/d of oil equivalent (boe/d).

Output will initially start at the Appomattox and Vicksburg fields around the end of this decade, and the sanctioned project includes capital for the development of 650mn boe of resources, Shell said. The company is still reviewing the development of its recent nearby discoveries at the Gettysburg and Rydberg prospects.

"These could become additional, high-value tiebacks to Appomattox, bringing the total estimated discovered resources in the area to more than 800mn boe", Shell said.

The company, which will have a 79pc stake in the Appomattox and Vicksburg fields and a planned semi-submersible floating platform at the development, did not provide cost estimates for the project. China's state-owned CNOOC unit Nexen is the other stakeholder.

"During design work for Appomattox, Shell reduced the total project cost by 20pc through supply chain savings, design improvements, and by reducing the number of wells required for the development," the company said. Shell estimates the project's breakeven Brent price at $55/bl.

Deepwater project economics vary depending on a number of factors, including the type of production facility, water depth, well productivity, the size of the resource and the availability of existing infrastructure. The sharp drop in oil prices since last year has been accompanied by a drop in costs for services and equipment, helping to alleviate the pressure on project economics.

The Appomattox project is located 129km from land at a depth of 2,195m. The FID further strengthens Shell's deepwater position, as the company is also in the process of taking over UK-listed BG, which has stakes in deepwater developments offshore Brazil. Last year, Shell produced 225,000 boe/d in the US Gulf.

Chevron said last year that developing the 80,000 b/d Stampede field in the US Gulf would cost $6bn.