Yemisi Izuora
Oil giant Shell may have jettisoned decisions on whether to go ahead with two large oil and gas developments in the Gulf of Mexico and North Sea after oil prices collapsed due to the COVID-19 crisis, a company source said on Wednesday.
The Anglo-Dutch company slashed its 2020 spending plans by a fifth as measures to halt the spread of the virus led to an unprecedented drop in oil demand and sent oil prices to their lowest in two decades.
As a result of this, the source said Shell had delayed a final investment decision (FID) to 2021 on whether to develop its Whale discovery in the southern part of the US Gulf of Mexico. The source said some work on the project continued.
A decision on Whale was initially planned for later this year, following the discovery in 2017 of what Shell said was one of its biggest finds in recent years.
Shell, the operator of the Whale project, holds 60 per cent in the field, while Chevron holds the remaining 40 per cent.
The project’s pace has slowed and an investment decision has been put off to next year, a Chevron spokeswoman said. The US oil major last month cut its 2020 project budget by $4 billion and suspended share buybacks to save cash.
Shell also decided this month to defer a decision about the Jackdaw natural gas field in Britain’s North Sea, the source said. The development plan originally envisaged linking the field to the existing Shearwater platform by 2024.
The delays come after private-equity backed Siccar Point Shell’s partner in another North Sea project, Cambo, announced on March 20 that the FID on the field was pushed back to 2021 due to coronavirus.
Shell previously said projects it would develop would be built to generate profit with Brent crude at $30 a barrel or more. The benchmark was around $20 on Wednesday.