* Appomattox project set to start production by end ofdecade
* Will be Shell's largest platform in the region (Adds details, quotes, share price)
By Ron Bousso
LONDON, July 1 (Reuters) - Royal Dutch Shell hasgiven the green light for the development of its largestplatform in the Gulf of Mexico after making steep cost cutswhich made the deep water project economical despite low oilprices.
The decision to pour billions of dollars into the Appomattoxproject comes as companies have scrapped around $200 billion ofmega-projects in the wake of the sharp decline in oil pricesover the past year.
Shell has operated in the Gulf of Mexico for over 60 years.The region contributes about 17 percent of total U.S. crude oilproduction according to the Energy Information Administrationand was the location in 2010 of the worst offshore oil spill inU.S. history, involving BP's Deepwater Horizon well.
Shell's investment decision shows the energy giant's bet ondeep water as it seeks to finalise by early 2016 the $70 billionacquisition of Britain's BG Group, which holds largestakes in Brazil's offshore oil production.
The project, some 80 miles (130 km) off the coast ofLouisiana, is expected to start production by the end of thisdecade and reach peak output of around 175,000 barrels of oilequivalent (boe) per day, Shell said on Wednesday.
Shell, which operates 7 platforms in the Gulf of Mexico,said it had reduced the project's cost by 20 percent throughdesign improvement and lower contractor and supplies costs,bringing its breakeven price to around $55 per barrel of oilequivalent.
The slump in crude prices since last June has jolted the oilindustry into deep cost cutting.
The Anglo-Dutch company holds a 79 percent stake in theAppomattox project while Nexen Petroleum, a wholly ownedsubsidiary of China's CNOOC, holds the remaining 21 percent.
Shell discovered the field in 2010. Once online, theplatform could boost its production in the region by more than60 percent from 2014 levels.
"Appomattox opens up more production growth for us in theGulf of Mexico, where our production last year averaged about225,000 boe per day, and this development will be profitable fordecades to come," said Marvin Odum, director of Shell UpstreamAmericas.
The platform will be initially linked to the Appomattox andVicksburg fields, with resources of around 650 million boe, andcould be linked at a later stage to nearby fields, Shell said.
"We highlighted the potential at Appomattox as a hub forfuture discoveries in our recent upgrade note, and we view theproject as one which will help drive Shell's presence in theGulf of Mexico materially by 2020," analysts at RBC CapitalMarkets said in a note.
"This, coupled with Shell's newly acquired assets in theSantos Basin should cement its position as a leader in Deepwaterdevelopment, in our view."
Last year Shell started production from the Mars Bdevelopment in the Gulf of Mexico. It is also currentlydeveloping the Stones project.
At 1400 GMT Shell shares were trading 1.4 percent higher at1.811 British pound per share.
Of the few projects that have been approved by oil companiesthis year, Norway's Statoil in February gave the go ahead todevelop the $29 billion Johan Sverdrup offshore field in theNorth Sea by 2019. (Reporting by Ron Bousso, additional reporting by Terry Wade inHouston; Editing by Dale Hudson and Elaine Hardcastle)
