Rystad Energy: Oil sands and Arctic most expensive oil resources; NA shale putting on pressure
20 June 2014
Oil and gas consultancy Rystad Energy estimates that oil sands and the Arctic continue to be the most expensive resources, with an average breakeven price of $75-80 per barrel of oil equivalent (boe). The attractiveness of these resources has declined over the past years, mainly as a result of the introduction of North American shale. The break-even price of NA shale is estimated at an average of $60-70/boe.
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| Source: Rystad Energy. Click to enlarge. |
Offshore is still in the race with lower break-even prices than US and Canadian shale developments (ultra-deepwater at $55-60/boe; deepwater at $50-55/boe and offshore shelf at $40-45/boe).
Though offshore projects have recently experienced a slowdown in investment levels, this decline is part of a natural cycle, and activity levels are expected to increase again. Both Deepwater and Ultradeepwater are necessary to develop in order to meet our demand outlook of around 100 million boe/d in 2020.
—Espen Erlingsen, Senior Analyst at Rystad Energy
Rystad Energy’s demand outlook is just above IEA’s demand outlook of 98 million boe/d in 2020.
This estimate is too high for Alberta Tar Sands currently pumped to USA at under $80/barrel. Cost excluding an average very low $2.47/barrel Royalties and very low taxes on NET profits is as low as $33 to $37/barrel.
Posted by: HarveyD | 20 June 2014 at 08:54 AM
It takes a lot of natural gas heat and water to cook the tar sands, then you have to put propane and solvents in with it to pipe it under heat and pressure for more than 1000 miles. If you want to look for efficiency, this is not the scenario.
Posted by: SJC | 20 June 2014 at 10:33 AM
I think Harvey is closer to correct. I have tied up money from time to time in Syncrude-related investments, and while the price varies greatly by project, $52 was the last "average" number I saw.
Posted by: Herman | 20 June 2014 at 02:04 PM
I would say $50 per barrel is probably "in the money" for tar sands. Which begs the question, when Saudi Arabia can extract oil for less than $10 per barrel, why are we are scraping the bottom processing tar sands for $40?
My answer to my own rhetorical question would be that we do not have control over the "easy oil" any more. So for the final question, why don't we get off our oil addiction and do our selves a favor?
Posted by: SJC | 20 June 2014 at 10:07 PM
SJC, when we can deliver the Joules per volume with even roughly equivalent convenience and price to consumers, it'll happen. With prices in the Euro1.5/l range across the Continent, liquid hydrocarbons still rule for the overall cost/convenience measure, even in very "green" societies like Deutschland's.
This past year, Chevron, Exxon and Shell spent more than US$120 Billion to boost Oil and Gas output, but their production actually declined. XOM is a pretty good example of how hard it is to get oil: cash and cash equivalents is down more than 2/3rd since 2011 while US corporations as a whole are growing their cash reserves consistently. Let's be clear: we are NOT staring at a Mad Max world where scarce fuel is gobbled up by roving gangs in a disintegrating society. But the cost of getting oil will continue to creep upward, tamped down from time to time by better E&P technologies. In the meantime, if all of you battery hopeful are right, solutions will come that will replace it, even as ICE technologies also continue to shave off consumption bit by bit. And in the lifetimes of a few readers of this site, oil will play a secondary role in mobility.
Posted by: Herman | 22 June 2014 at 05:36 PM
You assumed I meant batteries, when I actually advocate synthetic and bio synthetic fuels. Two billion vehicles with engines requiring liquid hydrocarbon fuels will not become all electric any time soon. That should be obvious to just about everyone, except the EV true believers.
I know we will need the fuels, I just don't want the world totally dependent on the oil companies and their monopoly.
Posted by: SJC | 22 June 2014 at 06:10 PM
Relax, its a floor cleaner AND a dessert topping. If Venezuela gets its act together, you will have a) Tar sands without freezing into ice, b) Oceanic access to large tankers with global destinations (No Keystone II to worry about, c) The largest proven petroleum reserves in the world (There would be some dispute over the Arctic, mainly Russian held). The returns could be huge and the effective margin of profit quite good, although there is no comparison with Kuwait or Iraq. What we need is a competitive mindset abroad to sell it, not more state sponsored cartelism.
Posted by: kalendjay | 23 June 2014 at 06:16 PM
Relax, the world will pump oil at a high rate for another 54+ years and NG for another 92+ years.
The unmanaged problem may be the disastrous ill effects on the environment, if we continue to 'drill baby drill' and continue to burn so much coal, oil and NG.
We could move the next Cold Age forward by a few thousand years and solve the world over population faster than expected.
Posted by: HarveyD | 24 June 2014 at 08:20 AM