With its fourth-quarter oil and gas production down 5% year over year, Royal Dutch Shell (RDS.A) is turning to the U.S. Gulf of Mexico as one of the main contributors to production growth over the next few years.

Shell commences production from Olympus platform
On Tuesday, the company announced it has begun production from its Olympus platform, its seventh and largest floating deep-water platform in the Gulf of Mexico. The platform, which is located roughly 130 miles south of New Orleans in water depths of 3,000 feet, is being used to develop the Mars B field, which is operated by Shell with a 71.5% interest alongside partner BP (BP -1.17%), which holds the remaining 28.5% interest.

With the addition of the Olympus platform, Shell expects to recover as much as 1.1 billion barrels of oil equivalent from the Mars B field, up from an initial estimate of 770 million barrels of oil equivalent. Combined with existing subsea wells, export pipelines and a shallow-water platform, Olympus will also prolong the life of the field until at least 2050, Shell reckons.

Production from the Mars B field commenced in 1996 and ramped up to an average of 60,000 barrels of oil equivalent per day (boe/d) last year. With the addition of the Olympus platform, Shell expects total production from Mars B to reach an estimated peak of 100,000 boe/d.

Shell's growth runway in the Gulf
First production from Olympus marks a major milestone for Shell, as it is the company's first major project in the region since the Obama administration implemented a moratorium on Gulf drilling in 2010 following BP's Deepwater Horizon disaster. As it aims to boost oil and gas output and meet its stated cash flow target by 2015, Shell is eager to commence production from its Gulf of Mexico deepwater projects, which it views as a "core growth opportunity."

In addition to Mars-B, the company continues to make progress in developing the Cardamom field, an ultra deepwater project located in water depths of 26,000 feet that is being developed using a new subsea system tied back to the Auger tension-leg platform. Cardamom, which is owned 100% by Shell, is expected to begin producing oil this year with an estimated peak production capacity of 50,000 boe/d.

Shell has also begun work on the Stones development, another ultra deepwater project located in the Gulf of Mexico's uncharted lower tertiary geologic trend at water depths of 9,500 feet. The project will initially be developed using two subsea production wells tied back to a Floating Production Storage and Offloading (FPSO) vessel and host facility, with six additional wells and multiphase pumping to be added in the second phase. Production from Stones is expected to commence in 2016, with an estimated peak production capacity of 50,000 boe/d.

Other companies in the Gulf of Mexico
Shell is just one of a handful of companies ramping up activity in the Gulf of Mexico. Peer Chevron (CVX 0.75%) also has a wave of projects set to come online this year, including Jack St. Malo, Big Foot, and Tubular Bells, which will allow the company to more than double its 2012 deepwater Gulf production level of 125,000 boe/d.

Tubular Bells, in which Chevron holds a 42.86% interest, will also be one of the key drivers of near-term production growth for Hess (HES 0.65%), which serves as the project's operator with a 57.14% working interest, along with its assets in North Dakota's Bakken shale and Norway's Valhall field. The project is expected to begin producing in the third quarter of this year, boosting Hess' net production by roughly 25,000 boe/d.

Similarly, Anadarko (APC) expects to bring online its Lucius and Heidelberg projects in the second half of this year and in 2016, respectively. Both facilities will have a production capacity of 80,000 barrels of oil per day, contributing significantly to Anadarko's existing Gulf of Mexico production, which has already grown significantly after its Caesar/Tonga project began producing oil in March of 2012.

The bottom line
With Gulf of Mexico oil production expected to surpass its previous peak of 1.8  million barrels per day by 2016, Shell finds itself well positioned in the region. If the company can ramp up Gulf production as expected, it should be able to meet its cash flow target by 2015, which should allow it to moderately increase its hefty dividend. Investors should keep an eye on any company announcements regarding delays that could materially impact the start-up dates for the Mars B, Cardamom, and Stones projects.