The oil and gas industry is adapting to sustained lower commodity prices, all to the good in the USA onshore, where the tight oil plays have become commercially viable at an oil price of under $60/bbl, Wood Mackenzie research has found.
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Seventy percent of future oil developments are commercially viable with Brent crude at Dollars 60 per barrel, up from 50 percent a year ago, natural resources consultancy Wood Mackenzie said on Wednesday.
Global oil supply research director Patrick Gibson says: “A total of 13mn b/d of new supply could be developed from both tight oil and conventional projects by 2025”.
The world will need all 13 million daily barrels of planned capacity by 2025, plus an additional 10 million, to meet rising consumption and make up for declining production at oilfields now in use, according to the consultant.
Of the 13 MMBPD, 9 MMBPD is commercial at $60/Bbbl Brent – more than at any point since 2009, and 1.5 MMBPD more than a year ago, according to Wood Mackenzie.
Although global break-even costs have fallen by $19 a barrel on average around the world, and some high-cost USA shale plays like the Eagle Ford formation in Texas have break-even below $40 per barrel, most deepwater projects still require prices to be higher.
More than half of that new production comes from USA shale basins in the Lower 48 states, where companies are growing more efficient.
The collapse in energy prices in 2014 and 2015 left many oil projects commercially unviable.
“You will begin to see more FIDs (final investment decisions) come through by the end of this year and early 2017”, said Flowers, adding that US tight oil and near field projects will be targeted as they are cheaper to bring on stream.
In fact, many pre-FID projects remain on the shelf.
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The countries that have suffered the most with the slump in oil prices include Angola and Nigeria, while projects in the US Gulf of Mexico remain high on the cost curve. Major projects may be delayed or canceled if Brent stays below $50, Wood Mackenzie estimated.
