Shell Mulls Abandoning an Offshore Platform for First Time

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Researched by Industrial Info Resources (Sugar Land, Texas)--Following OPEC's November 2014 announcement to maintain oil production levels, and as projects that were under way are now beginning to be realized, the extended period of low pricing has begun to take its toll. Profits for the major transnational oil companies have narrowed in recent years. With $40-to-$50 per-barrel oil hanging around longer than anticipated, energy producers are starting fewer initiatives, and some, like Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands), are having to cut their losses.

Having seen thinner margins in the past few years, Shell's Cougar offshore platform in the Gulf of Mexico was in danger of being and shut in and abandoned as soon as late 2016. While that decision was not made, the platform is potentially on the chopping block again after it entered third-stage compression earlier this year, while its production numbers were evaluated.

However, shutting down an offshore platform, much like building one, is littered with red tape and regulation. The regulatory permits to shut in and decommission a platform like Cougar could take two to three years from application to approval. As such, any decision by Shell today would mean Cougar still has many months of production ahead.

Shell may be beginning to pull permitting papers together, and Cougar does not look poised to continue operation past the end of the decade. If Shell decides to shut in and abandon the platform, it would be the sole such case for Shell, which usually sells its offshore assets for final production before they reach their end of life.

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