Shell’s huge fabrication yard in southeast Texas is a clear indication of the company’s ongoing Gulf of Mexico ambitions.

According to energy consulting company Wood Mackenzie, the firm is putting the finishing touches on Vito, its 13th major offshore project in the area, which has an estimated USD 3 billion cost.

Later this month, Vito will be towed by three tugboats to water about 150 miles southeast of New Orleans, where it will begin pumping gas and oil from eight wells. These waters are about 4,000 feet deep.

The Vito investment decision was made in 2018, and according to Paul Goodfellow, the UK oil company’s global head of deep-water operations, Shell will need to make more billion-dollar investments in the upcoming years merely to maintain current Gulf production levels.

Goodfellow mentioned that the company is quite optimistic about the long-term steady return in the Gulf, in spite of the mixed signals which are coming from the Biden administration.

He further mentioned in an interview that they will also have the opportunity to restock and replenish the portfolio as they will continue to pump in a huge amount of money, investigating and expanding the projects.

In his campaign, US President Joe Biden pledged to stop new oil drilling on federal property, including the Gulf, but as the midterm elections approach, his determination is being put to the test by sharp increases in the price of gasoline and other fuels.

However, it also seems that Biden is considering opening the gates for drilling in the Gulf of Mexico.

The administration’s plan calls for a maximum of 10 sales in the Gulf over that time period, plus one in Cook Inlet, Alaska. The oil sector has pushed for a minimum of two yearly lease sales for the next five years in the Gulf.

Oil and gas lobbying groups blasted the plan for leaving open the potential of no new offshore lease sales, while environmental groups criticized it for backing away from Biden’s campaign promises.

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The Gulf of Mexico loan facility has an interest rate of 6 percent. The interest rate increases Kosmos Energy’s borrowing capacity by $50 million from the initial prepayment agreement and extends tenor to five years. 

Neal Shah, Kosmos Energy’s Chief Financial Officer said: “The closing and syndication of the Gulf of Mexico facility enhances the company’s strong liquidity position with access to low-cost, flexible financing. Along with free cash generated by our low-cost production assets and proceeds of the recent Shell transaction expected this quarter, the company’s balance sheet is expected to strengthen into 2021.”

It is reported that Shell will acquire Kosmos’ interest in blocks offshore São Tomé & Príncipe, Suriname, Namibia, and South Africa. In September, the oil and gas company had agreed to sell a portion of its frontier exploration asset interests to Shell for $200 million, media reports said. 

The company said that following the close of its Gulf of Mexico facility it had nearly $650 million of available liquidity. Kosmos Energy is a deepwater independent oil and gas exploration company with key assets in Ghana, Equatorial Guinea and the US Gulf of Mexico.

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The platform is located 322 kilometres south of Galveston. It is a joint venture between three oil giants Shell, BP and Chevron.

Earlier this month, Shell temporarily suspended oil production after a leak was discovered on Exxon’s Hoover Offshore Oil Pipeline System. With that, the deepwater Perdido platform is shut, media reports said.

ExxonMobil spokesperson told the media, “We anticipate resuming flow on the line in a timely manner once it is safe to do so.” The Hoover Offshore Oil Pipeline carries oil from offshore oilfields to the Quintana Terminal near Freeport, Texas, according to the Exxon website.

Currently, Exxon’s Hoover Offshore Oil Pipeline System is shut for repair.  Recently, Shell pulled out from a deal established with Gazprom Neft, an oil subsidiary of Gazprom, media reports said. Under the terms of the deal, both companies were to jointly develop resources of five fields and licence blocks in the Yamal-Nenets region.

It was, in fact, noted to be a landmark deal for Shell and Gazprom Neft. With the split, Gazprom Neft will independently develop the licence blocks based on the previously approved work plan, media reports said. It is reported that the project’s initial investment was worth €1.6 billion and production to reach 10 million tonnes of oil equivalents. Production in the first field was slated for by the end of 2020.

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