World - Offshore Deepwater Oil Production One of Cheapest Sources of New Supply as Costs Reach New Low, Rystad Says
Oil production costs have reached a new low, making deepwater one of the cheapest sources of new supply, according to Norwegian energy intelligence firm, Rystad Energy.
A comprehensive Rystad Energy analysis of oil production costs has revealed that the average breakeven price for all unsanctioned projects has dropped to around $50 per barrel, down around 10 per cent over the last two years, and 35 per cent since 2014.
This means that oil is much cheaper to produce now compared to six years ago, with the clear cost savings winner being new offshore deepwater developments.
Rystad’s cost of supply curve for liquids now reveals that the required oil price for producing 100 million barrels per day (bpd) in 2025 has been in a continuous decline in recent years, with its updated projection showing that an oil price of only $50 per barrel is needed to keep oil production at this level.
Previously, in 2014, Rystad had estimated that the required oil price for producing 100 million barrels per day in 2025 was close to $90 per barrel, an estimate which it then revised in 2018 to around $55 per barrel.
The updated curve also shows another key trend. From 2014 to 2018, the cost of supply curve moved to the right.
In 2014, Rystad estimated that the total 2025 liquids potential was only 105 million bpd. In 2018, this number had increased considerably to around 115 million bpd. However, since 2018, Rystad has revised down the potential to about 108 million bpd, moving the cost curve to the left.