In another sign of improving market conditions and the strong comeback of deepwater activity in the U.S. Gulf of Mexico (GoM), Shell has made a final investment decision (FID) for the Vito development.

The FID comes after costs for the Shell-operated project, which comprises eight subsea wells with 18,000-ft in-well gas lift, were cut by about 70% from original estimates. Shell attributed the cost drop to a simplified design and collaboration with vendors in areas such as well design and completions, subsea, contracting and topsides design.

“With a lower-cost developmental approach, the Vito project is a very competitive and attractive opportunity industry-wide,” Andy Brown, Shell’s upstream director, said in a news release. “Our ability to advance this world-class resource is a testament to the skill and ingenuity of our development, engineering and drilling teams.”

The forward-looking breakeven price is less than an estimated $35 per barrel, Shell said April 24.

Vito was one of the deepwater GoM projects that William Turner, senior research analyst for Wood Mackenzie, flagged earlier this year as having benefitted from “capturing the bottom of the cycle in the supply chain and through the dip we’ve had since 2014.”

For tiebacks, which don’t require significant infrastructure to be installed, the typical breakeven can be as low as the mid $20/bbl, Turner said, compared to the mid $50s/bbl to mid $60s/bbl required for projects needing new platforms.

RELATED: Analysts Forecast 2018 Comeback For Deepwater GoM

Shell’s calculation for Vito’s forward-looking breakeven price is based on all forward-looking costs associated from FID. Such costs, the company said, don’t include costs associated with exploration and appraisal, lease bonuses, seismic and exploration team overhead costs.

Located in the GoM’s Mississippi Canyon area beneath more than 4,000 ft of water, Vito is expected to produce about 100,000 barrels of oil equivalent (boe) per day at its peak. Shell and partner Statoil are aiming for first oil in 2021. Vito has estimated recoverable resource of 300 million boe, Shell said.

“This decision sets in motion the construction and fabrication of a new, simplified host design and subsea infrastructure,” Shell said in the news release.

Vito will be Shell’s 11th deepwater host in the GoM, the company said.

Offshore