Shell has begun commercial production at the Malikai deepwater field off the Malaysian coast, aiming for a peak output of 60,000 bpd. This is Shell’s second deepwater project in Malaysia, after Gumusut-Kakap, which started operation back in 2014.
At the moment, according to Platts, Shell’s deepwater projects globally yield some 600,000 barrels of oil equivalent daily. The company has plans to raise this to 900,000 bpd by the early 2020s, and it is also working on two new deepwater projects in the Gulf of Mexico, which should boost deepwater output further.
According to a Reuters report, Shell has made 16 discoveries off the Malaysian coast in the last 28 months, using cutting-edge technology combining sonar, satellite imaging, and supercomputers. As a result, it has uncovered reserves estimated at a billion barrels of oil equivalent. It holds nine development licenses in Malaysia, all but one of them in deep waters.
This combination of modern tech and decades of large-project development could prove invaluable for Shell as it adjusts to an environment where it is getting harder and harder to find large deposits of oil and gas.
In the last ten years, according to a Wood Mackenzie report, the rate of successful discoveries in upstream exploration has dropped substantially. This has been part of the reason, along with low prices, that Big Oil has started turning to smaller, faster-return projects.
Still, large projects have not completely dropped out of favor, which is why technological advancements are coming in very handy, according to Shell’s Ceri Powell, head of exploration, in pinpointing the exact locations of the deposits and reducing the risks associated with discoveries that are away from land and shallow waters.
The uptick in oil prices should provide further motivation for investing in such projects, especially since Shell has not yet pacified its shareholders completely after the quitting of its Arctic project, where it poured US$7 billion. The impairment hit its balance sheet hard as it happened amid the oil price crisis that, many believe, brought about a new normal for oil prices.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.