Shell Exploration and Production (SEPCo) said yesterday it isready to roll on development of a major new deepwater Gulf ofMexico project, good for an estimated 300 million boe, at the sametime it announced another deep water discovery with potentialreserves greater than 200 million boe.

The Na Kika project, which has development costs of about $1.3billion, is expected to begin production in mid-2003. It willultimately consist of six subsea production systems servicingsatellite fields tied back to a centrally located floatingproduction facility, an industry first for the deep water Gulf ofMexico. The host facility will be permanently anchored in theMississippi Canyon Area about 140 miles southeast of New Orleans,LA.

The Na Kika project initially will produce hydrocarbons fromfive fields: Ariel, Fourier, East Anstey, Kepler and Herschel.SEPCo will attach the sixth field, Coulomb, which it owns solely,back to the host facility as capacity becomes available. All sixfields are located in water depths ranging from 5,800 to 7,600feet. Shell expects peak daily production rates to reach 325 MMcf/dof gas and 100,000 b/d of oil.

“Developing the Na Kika project in these record-setting waterdepths is one of the most substantial steps forward in applicationof deepwater development technology since SEPCo’s Auger tension legplatform was installed in 1993,” said Walter van de Vijver, SEPCo’sCEO.

BP and SEPCo share rights to Na Kika, and BP’s project sanctionis still pending. Shell will act as the pre-production operator,responsible for installation of the host facilities and subseasystems, as well as drilling and completion of the 10 developmentwells. BP will take over as post-production operator, whichincludes operation of the host facilities and surveillance of thesatellite fields.

Shell also is heavily involved in the new Princess discovery, asizeable sub-salt discovery just three miles north of the giantUrsa field, in Mississippi Canyon Block 765 in the Gulf of Mexico.

The discovery will be operated by Shell with a 45% interest, andis located in about 3,600 feet of water, about 130 miles southeastof New Orleans, LA. Other interest holders include BP with 23%, andConoco and Exxon Mobil each with 16%.

A discovery well, and three other penetrations drilled on thediscovery have encountered hydrocarbons in several areas totalingabout 300 net feet of pay. Shell believes the reservoir thicknessand quality of sands are very similar to the Ursa field, whereproduction has reached 100,00 b/d of oil and 140 MMcf/d of naturalgas from four wells. Potential oil and gas reserves in the newPrincess field could exceed 200 million barrels of oil equivalent.

“Princess is a significant addition to Shell’s growing deepwaterinventory,” said Vijver. “Common ownership of the neighboringinfrastructure at Shell’s Ursa field just three miles south ofPrincess allows us to consider some very cost-effective developmentoptions for this discovery.”

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