Rystad reports rising oil project costs

According to Rystad Energy, the cost of developing new upstream oil projects continues to rise due to ongoing inflationary pressures and supply chain disruptions

Their latest research reveals that the average breakeven cost for non-OPEC oil projects has increased to US$47 per barrel of Brent crude, marking a 5% rise in just the past year. Despite these growing expenses, breakeven prices remain lower than current oil prices.

Offshore deepwater and tight oil projects are still the most economical new supply sources, while oil sands remain the costliest. By evaluating breakeven costs, Rystad Energy estimates future crude oil supply based on the economic viability of different sources. Despite the increasing costs, the research projects that more supply will likely emerge by 2030, primarily driven by low-cost OPEC production and the region's significant resource potential. The estimated equilibrium oil price for meeting a 2030 demand of 105 million barrels per day is approximately US$55 per barrel.

The study also offers a detailed global cost-of-supply analysis, breaking down remaining liquids resources into producing and non-producing fields, with the latter divided into various supply segment categories. Onshore production in the Middle East is identified as the least expensive source of new oil, with an average breakeven price of $27 per barrel and substantial resource potential. Offshore shelf follows at US$37 per barrel, offshore deepwater at US$43, and North American shale at $45. In contrast, oil sands production has an average breakeven of US$57 per barrel, with some projects reaching up to US$75.

"Rising breakeven prices reflect the increasing cost pressures on the upstream industry. This challenges the economic feasibility of some new projects, but certain segments, including offshore and tight oil, continue to offer competitive costs, ensuring supply can still be brought online to meet future demand. Managing these cost increases will be critical to sustaining long-term production growth,”remarked Espen Erlingsen, head of upstream research at Rystad Energy.