It is reported that the global average production cost of crude oil has been declining since 2014, with a cumulative decline of 35%, according to a report released by Norwegian energy consulting company lestar.
Leista energy pointed out that the continued decline in production costs was largely due to offshore oil drilling activities.
According to the report, the cost of global offshore crude oil production fell by about 30% between 2014 and 2018. Among them, after 2018, the production cost of deep-sea oil and gas projects has decreased by 16%, while that of shallow water oil and gas projects has decreased by 10%.
Leista energy expects that the downward trend of offshore crude oil production costs may slow down in the next five years due to the reduction of approved new projects, but the overall impact is not significant.
At the same time, the production cost of tight oil in the world decreased significantly from 2014 to 2018. In 2014, lestar energy estimated that the average production cost of tight oil was $82 per barrel; in 2018, this figure had already dropped to $47 per barrel; this year, the average production cost of tight oil has further dropped to $44 per barrel.
In addition, the report also points out that the lower crude oil price is also a key factor to reduce the development cost and break even price of upstream projects. According to the report, since the oil price plummeted in 2014, in order to maintain market competitiveness, oil service companies have had to reduce their offer for exploration and development.
"Lower production costs mean more oil can be supplied at a lower price," said ESPEN erlingsen, head of upstream research at leista energy. However, it should be noted that although the cost has decreased, the breakeven price of most upstream projects is still higher than the current oil price, which indicates that the oil price needs to gradually recover from the current level if the upstream industry investment is to be restored. "