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By Rystad Energy – Oct 01, 2024, 4:00 PM CDT
- The cost of developing new oil projects has increased due to inflation and supply chain challenges, but breakeven prices are still below current oil prices.
- Tight oil and offshore projects offer the most competitive costs, while oil sands remain the most expensive production source.
- Despite rising costs, future oil supply is expected to increase, driven by production from OPEC countries and shale projects, with a projected equilibrium oil price of $55 per barrel in 2030.
The cost of developing new upstream oil projects is continuing to rise as inflationary pressure and supply chain woes endure. New research from Rystad Energy shows that the average breakeven cost of a non-OPEC oil project grew to $47 per barrel of Brent crude, a 5% increase in the last year alone. Despite rising costs, breakevens are still less than current oil prices.
Offshore deepwater and tight oil projects remain the most economical new supply sources, with oil sands still the most expensive. By analyzing breakeven costs, we can estimate how much crude oil will be delivered in the future based on the economic viability of different supply sources. The new research suggests that despite rising costs, more supply is likely in 2030, driven mainly by production from OPEC countries, where costs are low, and the resource potential is high. The new equilibrium oil price for 105 million barrels per day of demand in 2030 is around $55 per barrel.
The research includes a detailed global cost-of-supply analysis for remaining liquids resources, split into producing and not-yet-producing fields. The not-yet-producing fields are further divided into different supply segment groups. The report found that onshore Middle East is the cheapest source of new production, with an average breakeven price of just $27 per barrel. This segment also boasts one of the most significant resource potentials. Offshore shelf is the next cheapest ($37 per barrel), followed by offshore deepwater ($43) and North American shale ($45). Conversely, oil sands production breakevens average $57 per barrel, but can go as high as about $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.
Espen Erlingsen, Head of Upstream Research, Rystad Energy
Learn more with Rystad Energy’s Upstream Solution.
From 2014 to 2020, tight oil and OPEC were the clear winners,