Shell Exploration & Production Company announced today the start of first production from the Deimos discovery in the Gulf of Mexico's Mars Basin. Deimos is a phased development; Phase I has a peak production capacity of 30 kboe/day. This first phase consists of a three-well subsea system tied back to the Mars Tension Leg Platform. The system selection for Deimos Phase II is dependent on Phase I appraisal data and production. Options for the second phase could range from additional subsea tiebacks to a stand-alone concept.

Located in Mississippi Canyon Blocks 762 and 806 in 3,000 feet of water, Deimos was discovered in September 2002, when Shell encountered 248 true vertical net feet oil in multiple sands of the exploratory section and 287 net feet oil in the known producing field pays. The prospect is located in the Mars Producing Unit, which is a Shell and BP partnership (71.5 percent and 28.5 percent working interests, respectively).

Russ Ford, Shell's Technical Vice President for the Americas Region said:

"This phased-development approach for Deimos allows Shell and our partner to realize short-term production, while gathering information in order to optimize Phase II and mature the overall Deimos opportunity in an efficient timeframe.

"Deimos is a subsea tieback that utilizes the design, construction and flow assurance knowledge and experience we have developed across our Gulf of Mexico assets. Deimos leverages the existing investment and infrastructure we already have in the basin, namely the Mars TLP and related export pipelines and is evidence of the untapped potential remaining in one of the Gulf's most prolific producing areas."