Shell Shuts Auger Platform for Cardamom Start-Up

Royal Dutch/Shell is shutting down production at its Auger platform in the Gulf of Mexico while it hooks up its new Cardamom oilfield to the two-decade old platform's infrastructure.

Auger was the world's first tension leg platform (TLP) that had both a permanent drilling rig and full-fledged production facilities. It was installed in the Gulf of Mexico in 1994 at a then world water depth record of 2,860 feet. Auger's structure is basically a floating hull that supports a five-story deck over an area the size of two football fields.

A Shell spokeswoman said on Wednesday the company began work this week on the shut-in which will cut off 55,000 barrels of oil equivalent per day of production. A statement said the Auger platform "should restart in the fourth quarter of 2013."

An Auger pipeline feeds the Bonito sour crude stream, according to the Shell web site.

Crude traders and brokers said the announcement of the shut down explained the stronger price for Bonito on Tuesday, when August barrels for the cash crude grade traded at $4.45 and $4.60 a barrel over the benchmark U.S. crude futures.

That was well above sellers' offers seen on Monday at $2.90 over the benchmark.

Eugene Island crude , another Gulf Coast sour grade, had sellers' offers pegged at $4.25 a barrel over the futures benchmark on Tuesday, after trading at $2.70 over on Monday.

Offers from sellers for Bonito were pegged stronger at $5.50 over the futures benchmark on Wednesday and Eugene Island traded at $5.25 a barrel.

Cardamon, 100 percent owned by Shell, will start producing in 2014 and will deliver at a peak rate of 50,000 boepd, adding to Auger's 55,000, of which Shell owns 30,000.

"Cardamom is a great example of using existing infrastructure to increase oil and gas production in a less capital intensive way," Shell executive president John Hollowell said.

Shell, like its peers, is struggling to replace reserves and boost production, and faces a squeeze on earnings as the huge cost of building oil infrastructure rises.