Oil & Gas

27 May 2022

Shell, BP Strike US Gulf Deal Ahead of Planned Drilling

27 May 2022  by   
Shell and BP have finalized an exchange of acreage in the deepwater Gulf of Mexico ahead of planned drilling in the greater Mars Basin, one of the region’s most prolific areas for oil and natural gas production.

Shell confirmed a “commercial deal” with BP in the Mississippi Canyon (MC) and Atwater Valley areas but offered no further details of the agreement or future plans.

However, federal records show a recently approved drilling permit on file at one of the leases: MC 977, which is due to expire at the end of next month.

A source with knowledge of Shell’s planning said Shell intends to drill the top portion of a well on that block in the coming weeks in order to hold the lease, and then return at a later date to drill the bottom section with another rig.

The transaction and the drilling plans show the continued emphasis among Gulf operators on partnerships and targeting exploration prospects near existing infrastructure and in known oil-producing plays.

Near-Field Targets

The transaction included at least 18 individual leases. Shell will remain operator of 13 of them and BP will operate the remainder. The Shell-operated blocks have that company now on 60%, with BP holding the remaining 40%.

The biggest cluster of leases in the deal, comprising 10 individual blocks, lies just south and southwest of Shell’s Europa field, a subsea tieback development producing through Shell’s Mars tension-leg platform about 16 miles away.

Europa has produced for more than two decades. It was producing just under 3,000 barrels per day of crude in March this year, according to Bureau of Ocean Energy Management (BOEM) records.

Drilling Plans

The centerpiece of the deal, at least in the near term, would appear to be MC 977.

Shell acquired 100% of that block last year in a deal with the lease’s four previous owners. At the time, Shell told Energy Intelligence that the prospect associated with the lease was called “Cuitlacoche,” although the company declined to comment on any prospect names when contacted this week.

That prospect was previously known as “Haleakala” when it was owned by Anadarko Petroleum, years before the company merged with Occidental Petroleum. Anadarko had described Haleakala in 2015 as a subsalt Miocene prospect “on trend” with Shell’s Vito discovery, which lies about 21 miles to east.

An industry source said the prospect in MC 977 lies at a depth of more than 30,000 feet.

After Shell and BP drill the top hole, they will likely have up to a year to return and finish the well, per BOEM’s lease retention rules.

The well in MC 977 is understood to be part of a “batch drilling” program Shell is conducting in the area with drillship Noble Globetrotter II.

A source said the rig would next move to MC 802 to drill the top section of a well targeting the “Byblos” prospect in an adjacent block. Shell is operator and 50% owner of that block alongside original Byblos operator Equinor. BP is not thought to be involved.

BP Adds a Partner

BP will operate a separate cluster of six blocks less than 20 miles west-southwest of MC 977, in the northwestern corner of Atwater Valley.

BP had previously agreed to farm out a 30% stake in four of these blocks to Oxy. Oxy still holds that interest, and now Shell has a 25% interest as well, leaving BP with the remaining 45%, BOEM records show. Those leases expire in 2025 and 2026.

At least two other blocks are also included in the Shell-BP deal. Both are located in the heart of the Mars Basin, just north of Shell’s planned Vito installation, underscoring the industry's continued focus on infrastructure-led exploration.


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