Shell begins oil production at new Gulf site

HOUSTON For all the talk of alternative energy and decreasing demand for oil, this is a sure sign big oil believes we'll all be driving gas-powered cars for a long time to come. It could be a model for similar projects in tough-to-reach spots all over the world.

What's coming out of the small test pipes at Perdido is really what it's about.

"This is the first oil we're producing at Perdido," said Brandon Tate with Baker Hughes.

Fourteen years of work and $3 billion in investments, all designed to get at oil that, until just a few years ago, was out of reach.

"I started this personally about five years ago, on a journey to create something that's never been done before," said Shell employee Arthur McAlpin.

He's talking about Perdido, Shell's latest offshore drilling and production site. It is the newest frontier in Gulf of Mexico oil exploration. To get there, you go over lots of empty water, travelling 200 miles south of Galveston before you arrive at the spar.

Perdido is not the biggest platform in the Gulf, but definitely the newest and certainly the one pushing the industry to deeper depths.

"This is the first time we've ever tried this stuff," said Shell employee Todd Coulon, who's also working at Perdido.

To give you an idea how deep the waters are, yellow pipes are used to go down through 8,000 feet of water and another 10,000 feet of sand to get oil. The bottom of the Gulf here is filled with uneven ground and canyons. The oil is hidden in an untapped reservoir and under lower pressure than other Gulf fields.

It still refines the same, but Shell needed to design huge pumps on the Gulf floor just to get the oil and natural gas up to the surface.

"I've been on projects before that I thought were cutting edge," Coulon said. "But this is cutting edge."

The gamble started to pay off earlier this month. By the end of this year, Shell hopes to have 100,000 barrels of oil racing through pipelines toward the shore from this platform. And they expect to do that for the next 20 years before the oil here is gone.

They'll use the drilling rig on board Perdido to drill 22 wells below Perdido; the rest are scattered miles from here.

In fact, the one well working so far is almost three miles from the spar. The industry's been doing that for years, and reaching out that far is the only way to make projects like this work.

"It's real hard to fathom, who thought we'd be doing something this?" Coulon said.

At current oil prices, the project will eventually bring in about $8.5 million a day. But take out the expense to run an offshore project that far away, the $3 billion project will likely takes years to be profitable. Shell won't say exactly how long.

What's the most popular question about the Perdido Spar platform? Ted Oberg shares it - and the answer - with you.
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