Shell approves development of Gato do Mato subsalt oil field offshore Brazil

Shell approved the long-delayed development of the Gato do Mato subsalt field offshore Brazil, with first oil expected to be pumped in 2029, the company said March 21.

"Gato do Mato is an example of our ongoing investment in increasingly efficient projects," said Zoe Yujnovich, the company's integrated gas and upstream director. "The project contributes to maintaining stable liquids production from our advantaged upstream business and expands our leadership as the largest foreign producer in Brazil."

Shell estimated that the Gato do Mato field contains about 370 million barrels of recoverable reserves, the company said. Shell plans to install a floating production, storage and offloading vessel, or FPSO, capable of producing about 120,000 b/d.

Natural gas output at the field will be reinjected and used for reservoir management, according to Shell. The company, however, could export gas from the field at a later date.

The approval came after years of delays and uncertainties regarding the project, where oil was first discovered in the Santos Basin's BM-S-54 block in the early 2010s. Shell acquired the block in 2005 during Brazil's seventh bid round. Further development of the Gato do Mato discovery, however, was derailed by Brazil's implementation of a production sharing regime in 2010.

Shell was forced to wait because a portion of the discovery extended beyond the borders of the BM-S-54 block into acreage owned by the government, which required the use of production sharing contracts because it was located inside the country's so-called subsalt polygon. Shell than acquired development rights to the Sul de Gato do Mato production sharing area at an auction held in October 2017.

Shell partnered with TotalEnergies to win development rights to the block, paying a signing bonus of about $63 million and guaranteeing Brazil's government an 11.53% share of profit oil from the field.

Shell currently owns a 50% operating stake in the block, according to the company. Colombia's Ecopetrol holds a 30% equity stake, while the remaining 20% share is owned by TotalEnergies.

A final investment decision previously was expected in the early 2020s, but the global coronavirus pandemic and Russia's invasion of Ukraine forced additional postponements amid a surge in development costs, according to industry officials.

Shell has long been a major player in Brazil, including holding a 20% equity stake in the Libra production sharing area that contains the Mero subsalt field. Libra was the first subsalt acreage sold under Brazil's production sharing regime in 2013, with first oil pumped in 2017.

In addition, Shell holds stakes in the Sudoeste de Sagitario and Tres Marias production sharing blocks. Shell also holds operating and equity stakes in more than 20 offshore exploration and production concession blocks in the Barreirinhas, Campos, Potiguar and Santos basins.

In January, Shell was the second-biggest oil and natural gas producer in Brazil, according to the latest production report from the National Petroleum Agency, or ANP, released March 6. Shell produced 360,794 b/d and 19.1 million cu m/d in January, the ANP said.