Royal Dutch Shell Plc (NYSE: RDS-A) and partner Mitsui Oil Exploration Co. Ltd. have given the green light to the Kaikias subsea development in the deepwater U.S. Gulf of Mexico (GoM).

Subsidiaries of the companies—Shell Offshore Inc. and MOEX North America—have made a final investment decision (FID) agreeing to proceed with the first phase of the project described by Shell as “an attractive near-field opportunity with a competitive go-forward breakeven price below $40 per barrel.”

Located in the Mars-Ursa Basin, Kaikias is believed to hold more than an estimated 100 million barrels of oil equivalent (MMboe) of recoverable resources, according to Shell. Costs for the development, which is operated by Shell with an 80% working interest, were not disclosed. MOEX holds a 20% interest in the development.

With the price for a barrel of West Texas Intermediate crude oil consistently trading above $50, investors are gaining the confidence needed to proceed with offshore projects that were once stalled by a downturn that cut profits and forced companies to become more efficient. Kaikias is one of several projects gaining financial investment commitments in recent months.

“Kaikias is an example of a competitive and capital-efficient deep-water project using infrastructure already in place,” Andy Brown, upstream director for Shell, said in the Feb. 28 statement. “The team has done a great job to reduce the total cost by around 50% by simplifying the design and using lessons learned from previous subsea developments.”

The operator redeveloped exploration and appraisal wells for production, reducing the need for new drilling. The decision to use existing oil and gas processing equipment on the nearby Ursa production, which is also operated by Shell, also saved costs by lowering the need for additional topside modifications.

The first phase of the planned two-phase project includes producing oil and gas from three wells tied back to Ursa via a flowline. At its peak, each well is designed to produce up to 40 Mboe/d, Shell said.

Shell, Mitsui Oil Exploration, subsea, deepwater, Gulf of Mexico, oil, gas

The project is expected to help move Shell closer to its goal of growing its deepwater business, an ambition that was bolstered by its acquisition of BG Group a year ago. The deal strengthened the company’s position in deepwater oil, including offshore Brazil, as well as in the LNG market.

“Shell’s deepwater production is expected to increase to more than 900,000 boe/d by 2020 from already discovered, established reservoirs,” Shell said in the release. “In the Gulf of Mexico, two other Shell-operated projects are currently under construction or undergoing pre-production commissioning: Coulomb Phase 2 and Appomattox.”

The Kaikias FID comes about five months after Shell started production from its Stones development in the GoM. When the Stones development is fully ramped up by year-end 2017, Shell said production is expected to be about 50 Mboe/d.

Other projects recently sanctioned include Mad Dog Phase 2 in the GoM’s Green Canyon area.

BHP Billiton Ltd. (NYSE:BHP) said Feb. 9 it agreed to spend $2.2 billion for its share of the BP-operated Mad Dog 2 project. The company holds a 23.9% stake in the field. The deepwater project was sanctioned by BP Plc (NYSE: BP), which holds a 60.5% participating interest in the field, in fourth-quarter 2016. In a U.S. Securities and Exchange Commission filing Feb. 23, Chevron Corp. (NYSE: CVX) said a final investment decision was reached in February. Chevron USA affiliate Union Oil Co. of California holds the remaining interest in the project.

Across the globe in the Mediterranean Sea, the $3.75 billion Leviathan development offshore Israel was sanctioned earlier this month by Noble Energy (NYSE: NBL). The field, said to hold some 22 trillion cubic feet of recoverable natural gas resources, is being jointly developed by partners Delek Drilling, Avner Oil Exploration and Ratio Oil.

Velda Addison can be reached at or via Twitter @VeldaAddison.