2nd UPDATE: Shell's Flagship Field Feels Pain Of US Drilling Ban

(Adds detail, background.) LONDON (Dow Jones)--Royal Dutch Shell PLC (RDSB) said Thursday its flagship deep water field in the Gulf of Mexico, Perdido, has been shut down since April in part because of the U.S. drilling moratorium and will only resume production at a slower-than-expected rate in October. Production at Perdido was shutdown less than a month after it started and will remain halted until October because of maintenance work and the ban that has prevented Shell from drilling production wells connected to the platform, said Chief Financial Officer Simon Henry in a conference call with reporters. This illustrates the impact of the U.S. ban on deep water drilling following the blowout and oil spill from BP PLC's (BP) Macondo well. Perdido was expected to produce 100,000 barrels a day of oil, enough to meet the energy needs of 2.2 million U.S. households, but will now reach that target much more slowly than expected. Shell launched Perdido with great fanfare as the opening of a new frontier in deep water oil production. "It is the most technologically advanced facility in the world," being further offshore and in deeper water than any other field, said Tyler Priest, oil historian and professor at the University of Houston at the field's launch in March. It sits on top of a giant floating steel cylinder designed to stay upright even in powerful hurricanes. As a result of the moratorium, Shell has also had to idle seven drilling rigs in the region and write off $56 million in its second quarter results because of the moratorium, he said. Despite not being able to use the deep-water rigs, which can cost around $500,000 a day to lease, Shell has no plans to put them to work elsewhere, said Henry. "A six-month moratorium is too short to make it economically attractive to move the rigs," he said, adding that in some cases Shell has been able to negotiate a 60-70% reduction in the daily cost of leasing the rigs. Because Perdido was not running at full capacity at the time of the shutdown, the impact on Shell's production of the moratorium this year will be a modest 8,000 barrels of oil equivalent a day, just a quarter of one percent of the company's second quarter production, Henry said. The Obama administration ordered the six-month moratorium on drilling in deep water following the explosion aboard the Transocean Ltd. (RIG) drilling platform Deepwater Horizon on April 20. The blast killed 11 men and triggered the worst oil spill in U.S. history as an estimated 4 million barrels fouled the Gulf of Mexico. Shell is not the only oil company feeling the effect. Helge Lund, the chief executive of Norway's state-controlled oil company Statoil ASA (STO) said Thursday the moratorium could cost his company $100 million. The ban has been condemned by many people in the oil industry as an over reaction that threatens tens of thousands of jobs and the billions of dollars of earnings among countless businesses that depend on the region's oil industry. The initial moratorium, announced May 27, was overruled by a federal judge in June following a legal challenge from a number of oil services companies. The Obama administration responded by issuing a new moratorium July 13. The moratorium is intended to pause deep water drilling until investigations into the cause of the Deepwater Horizon blast are published this fall. BP's own internal investigation will issue preliminary findings at the end of August. -By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; james.herron@dowjones.com Order free Annual Report for Royal Dutch Shell Visit http://djnweurope.ar.wilink.com/?ticker=GB00B03MLX29 or call +44 (0)208 391 6028 (END) Dow Jones Newswires July 29, 2010 09:50 ET (13:50 GMT)