Shell moves forward with Gato do Mato Oil project in Brazil’s pre-salt region

Shell Brasil Petróleo Ltda., a subsidiary of Shell plc, has confirmed its Final Investment Decision (FID) for the Gato do Mato project, a deep-water oil and gas development in Brazil’s pre-salt Santos Basin. This decision cements Shell’s long-term commitment to offshore oil production in one of the world’s most resource-rich basins. The project, which is expected to begin operations in 2029, represents a strategic move to strengthen Shell’s position in the Brazilian energy sector while contributing to global oil supplies.

The Gato do Mato Consortium includes Shell as the operator with a 50% stake, alongside Ecopetrol with 30% and TotalEnergies holding 20%. The development plan includes a state-of-the-art Floating Production Storage and Offloading (FPSO) vessel, with an estimated production capacity of up to 120,000 barrels of oil per day. According to initial assessments, the field holds recoverable resources of approximately 370 million barrels, reinforcing the potential of Brazil’s offshore energy sector.

Why Is the Gato do Mato Project Significant for Shell and Its Partners?

The Gato do Mato project is located in the Santos Basin, an area that has played a pivotal role in Brazil’s emergence as a major offshore oil producer. Covering two contiguous blocks—BM-S-54, awarded as a concession in 2005, and Sul de Gato do Mato, acquired under a production sharing agreement in 2017—the field lies in water depths ranging from 1,750 to 2,050 meters.

Shell’s decision to proceed with the development highlights the importance of Brazil’s pre-salt reserves, which have drawn extensive investment from international energy firms due to their significant production potential. These ultra-deepwater fields, found beneath thick layers of salt and rock, require advanced drilling technologies and substantial capital investment. However, they also offer some of the highest productivity rates in offshore oil extraction, making them particularly attractive for energy majors like Shell, Ecopetrol, and TotalEnergies.

According to Shell’s Integrated Gas and Upstream Director, Zoë Yujnovich, the project aligns with the company’s focus on delivering efficient, high-return assets. She emphasized that the Gato do Mato development will help maintain stable liquid production from Shell’s upstream operations while supporting long-term energy demand.

How Will the FPSO Vessel Enhance Production at Gato do Mato?

A critical component of the Gato do Mato project is the deployment of a next-generation FPSO vessel, which will be responsible for extracting, processing, storing, and offloading oil. In April 2024, Tokyo-based MODEC Inc. secured the Front-End Engineering and Design (FEED) contract for the FPSO system, reinforcing its established presence in Brazil’s offshore sector.

The FPSO will be moored at a water depth of approximately 2,000 meters, around 250 kilometers off the coast of Rio de Janeiro. MODEC will oversee the design of the hull and topside processing units, ensuring the facility can efficiently handle crude stabilization, storage, and offloading to shuttle tankers. The FPSO will also be equipped with gas reinjection capabilities, allowing the field’s natural gas to be reinjected for reservoir pressure maintenance or potentially exported to onshore facilities in the future.

MODEC has a long-standing history in Brazil, having delivered 16 FPSOs to the country and currently working on two additional units. The Gato do Mato FPSO will be the second vessel MODEC supplies directly to Shell for operations in Brazilian waters. MODEC’s President and CEO, Hirohiko Miyata, expressed confidence in the company’s ability to deliver a high-performance facility, citing a decades-long partnership with Shell.

What Are the Financial and Market Implications of Shell’s Investment?

The Gato do Mato project is expected to deliver an internal rate of return (IRR) exceeding Shell’s hurdle rate for upstream investments, making it a financially attractive venture. With production expected to ramp up by the end of the decade, the project could provide a steady revenue stream for the consortium partners while contributing to Brazil’s growing oil exports.

The announcement of Shell’s FID has drawn attention from investors, as major energy companies continue to assess the long-term viability of offshore oil projects. As of March 21, 2025, Shell plc (NYSE: SHEL) was trading at $70.98, reflecting a slight decline of 0.97% from the previous close. Despite this minor fluctuation, analysts maintain a positive outlook on Shell, with a consensus “Buy” rating and an average price target of $79.11. The company’s strong cash flow and commitment to LNG expansion are viewed as key drivers of future value.

Ecopetrol (NYSE: EC), holding a 30% stake in Gato do Mato, was trading at $10.07, down 0.40%, while TotalEnergies (NYSE: TTE) saw a 1.14% decrease, trading at $63.33. These marginal stock movements reflect typical market adjustments following major capital investment announcements. In the long term, both companies stand to benefit from increased offshore production once the project becomes operational.

Market sentiment remains largely positive, as investors recognize the strategic importance of deep-water oil reserves in Brazil. However, external factors such as fluctuating oil prices and geopolitical risks will continue to influence stock performance. Industry analysts recommend a balanced approach, with Shell remaining a strong investment option for those focused on long-term energy sector growth.

How Does Gato do Mato Fit Into Brazil’s Offshore Energy Future?

Brazil’s pre-salt reserves have become a cornerstone of the country’s energy strategy, attracting major international investments. The success of the Gato do Mato project will not only enhance Shell’s footprint in the region but also contribute to Brazil’s goal of expanding offshore production capacity.

As the global energy landscape evolves, projects like Gato do Mato underscore the continued importance of offshore oil in meeting demand, even as companies explore alternative energy solutions. Shell’s investment reinforces confidence in Brazil’s offshore sector, positioning the country as a key player in future oil and gas markets. With operations set to begin in 2029, Gato do Mato is expected to play a significant role in shaping Brazil’s energy future while delivering strong returns for its investors.