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Lux Research: Cost of replacing a barrel of produced oil up 350% in 13 years

The cost associated with replacing a barrel of produced oil has risen from $6 per barrel in 1998 to $27 per barrel in 2011, according to Lux Research—an increase of 350%.

Upstream spending is back to pre-2008 levels as producers, excluding NOCs (national oil companies) and OPEC organizations, are expected to spend close to $270 billion in 2013. With declining production from the world’s largest fields putting 12% of world oil production at risk, and oil prices in a range that justify large capital budgets, spending is expected to reach $300 billion by 2020 and $400 billion by 2033. Production, however, has remained relatively flat, signaling that the days of easy oil are over, Lux says in an upcoming report from its Exploration and Production Intelligence service.

Unconventional oil will be a key area of focus for producers. The blossoming tight oil sector in the US has reignited talks of energy independence, but growing investment in offshore drilling is opening foreign reserves. US Geological Survey (USGS) studies suggest that significant reserves are still waiting to be found in deepwater regions of the world. In 2012, 62.5% of unconventional capital spending will be offshore, while 32% will be targeted toward shale plays, and 5.4% will be in the oil sands.

Cost to replace each barrel of oil produced. Source: Lux Research. Click to enlarge.



Cheap conventional oil may have peaked but unconventional (higher cost) oil production will go up for many more decades.

Coal, NG and bio-mass converters will also add more (higher cost) liquid fuel to the market for many decades.

If the oil 'Cost' trend from the last five years continues, BEVs and FCVs may become more competitive will possible total life time cost less than ICEVs by 2020/2025 or so.

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