Shell is doing what BP did in 2009/2010 - a deep water massive oil spill to keep their heavy deepwater investment projects afloat.
"Shell plans to drill more than two miles underwater in the Gulf of Mexico in pursuit of new sources of oil and gas. If successful, the Guardian reports, the project will rank as the world’s deepest offshore facility."
Wait a minute, is this profitable?
Assuming minimum capex of $5 billion dollars in installation costs alone (based on BP Thunderhorse), a 50,000 bbl/day extraction and a "unreasonable" sustainable oil price of $95/bbl (based on current price), it will take 1053 days (2.88 years) of deepwater production to earn back the capex. That is without considering the high cost of production at between $80-90/bbl.
At a net profit of $20/bbl at 50,000 bbl/day production it would take 13.7 years just to break even. But at 50,000 bbl/day production, it would also take 13.7 years to deplete the 250 million recoverable reserves.
That's not all.
Consider the total recoverable reserve at just 250 million bbls. At $20/bbl net profit, it would bring in only $5 billion max. What? Just to break even at the best scenario.
What if with the failing economies around the world, the price of oil drops below $70/bbl? This is not an unrealistic scenario.
In 2008, the oil prices were inflated to above $140/bbl in July only to crash to $30/bbl by Nov 2008.
For Shell to break even in 2.88 years, the oil prices need to hold at ($95 + $80) or $175/bbl for at least 2.88 years plus the present 5 years (exploration, construction & installation), to bring the oil online. Do you see this happening? Very unlikely if the present world's daily consumption of 85 million bbls/day drops as well.
Now consider why BP rushed to drill the Macondo exploration well in Jan 2009 when oil prices were still well below $40/bbl? Especially when the recoverable reserve of the Macondo prospect was just 70% of the 50 million bbls or 35 million bbls.
Now you see why BP's Macondo well was the Sacrificial Lamb to keep BP's mega trillion investment in the deep water Gulf projects afloat.
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