Deepwater oil deposits have the reputation of being very costly to develop, but Wood Mackenzie says they are becoming just as competitive as onshore tight oil projects.
Michael Murphy, a Wood Mackenzie analyst who monitors the Gulf of Mexico, argued that Royal Dutch/Shell’s final investment decision (FID) on the Power Nap field proved that the cost structure of deep-water projects was changing. Shell expects Power Nap to break even at less than $35 per barrel, comparable to the levels reported for shale projects, he told Offshore Energy Today.
Murphy attributed these lower costs to subsea tie-back systems, which connect new offshore discoveries to existing production facilities. “With internal rate of returns above 30% and development breakeven in the low to mid-$30s, the sanctioning of subsea tie-backs is proving that deep-water can compete with tight oil,” he said.