Shell opens its first post-Macondo platform in U.S. Gulf

By Kristen Hays

HOUSTON, Feb 4 (Reuters) - Royal Dutch Shell (Xetra: R6C1.DE - news) said on Tuesday it is ramping up production at its newest Gulf of Mexico oil and gas platform, its first to start up after BP Plc's 2010 Macondo oil spill fouled the basin and stopped drilling for months.

Shell (LSE: RDSB.L - news) 's Olympus (Frankfurt: OLY1.F - news) platform, towed out to sea last summer, is the first of seven new state-of-the-art platforms slated to start pumping Gulf crude to shore through 2016, reversing a decline in output and supplementing the U.S. onshore shale oil boom.

"2014's a big year for us in terms of starting up new production," John Hollowell, Shell's executive vice president for deepwater in the Americas, told Reuters in an interview.

Shell's Olympus sits about a mile (1.6 km) from its Mars platform around 130 miles (210 km) south of New Orleans, and is the company's seventh operated platform in the Gulf. Oil began flowing from its first completed well on Monday.

Shell said Olympus will help push the Mars oilfield's production to 100,000 barrels of oil equivalent per day (boepd) by 2016. In 2013, the field produced an average of 60,000 boepd, the company said.

Other major Gulf producers with projects slated to start cumulatively pumping more than 700,000 barrels per day in the next two years include Chevron Corp, Anadarko Petroleum (Dusseldorf: AAZ.DU - news) Corp and Hess Corp.

Growth in Gulf output will bolster the United States' emerging role as the world's top oil and gas producer, a trend helped by improved deepwater technology and advances in hydraulic fracturing and horizontal drilling that unlock hydrocarbons from tight rock reservoirs in places like North Dakota's Bakken and the Permian of West Texas.

The platform startup, as well as other projects to increase Gulf oil output, was a sharp contrast to cost issues facing the Anglo-Dutch oil company, including its decision to suspend its controversial Arctic drilling program as a wider effort to cut spending and streamline operations.

Shell Chief Executive Ben van Beurden told investors last week that improving profitability in North American upstream "will be a particular priority for us."

Recent signs of such streamlining include Shell seeking to sell a stake in its newly reversed 300,000 bpd Houston-to-Houma crude oil pipeline, and shelving a proposed gas-to-liquids (GTL (BSE: GTL.BO - news) ) plant in Louisiana because of rising costs.

But Shell's commitment to the Gulf, where the company is the top oil producer, as a growth area remains. Hollowell said the production startup of up to 50,000 boepd from its Cardamom field - which will be hooked up to Shell's Auger platform - is on track for this year.

Shell also aims to start pumping in 2016 from its Stones field in the Gulf, using the basin's second floating production, storage and offloading (FPSO) vessel rather than a moored platform like Olympus.

DELAYS ELSEWHERE

While Olympus started earlier than planned, startup for one of Chevron (Amsterdam: CHTEX.AS - news) 's new platforms has been pushed to 2015. Chevron had planned to start both its 170,000 bpd Jack/St Malo and 75,000 bpd Big Foot platforms later this year, but Big Foot will be shipped out to sea in the third quarter with startup slated for 2015, the company said.

Both platforms figure heavily in Chevron's production growth plans.

Also, BP (LSE: BP.L - news) last year put the brakes on its second Mad Dog platform project because costs had risen sharply.

A BP spokesman said on Tuesday that the company remains committed to the project, albeit retooled as it evaluates different design and development options.

One other deepwater platform started up after the BP spill. LLOG Exploration in December 2011 began producing from its Who Dat field at a platform with capacity to handle up to 60,000 barrels per day of oil and 150 million cubic feet per day of natural gas. LLOG aims to start up its Delta House platform next year.

Hollowell said the startup of Olympus came six months ahead of schedule on efficiencies in design, construction and commissioning. Shell had expected the platform to start pumping in the second half of 2014, he said.

The quicker startup is partly due to a new onshore control room in New Orleans for Olympus, from which the company commissioned its seabed production equipment.

"We are creating these operations centers for all our platforms. Olympus just happens to be the first one," Hollowell said.