Half of Future Oil Output Uneconomic at $60/Barrel--Wood Mackenzie
From WoodMac:
Half of oil production from future developments is uneconomic at
US$60/bbl Brent – this is the conclusion from our comprehensive
breakeven analysis of future global oil developments. These comprise of
conventional projects which have yet to receive final investment
decision (pre-FID) and future drilling in US onshore Lower 48 plays;
which are critical for future oil supply.
Using individual asset data and our suite of proprietary tools, including our Oil Supply Tool and Upstream Data Tool,
we have produced a granular picture of the cost of new supply. By 2025,
production from pre-FID projects and US Lower 48 future drilling could
be nearly 15 million b/d. Only 7.6 million b/d comes from projects which
achieve commerciality at US$60/bbl, a likely screening criteria.
Production from most future
developments is required to fill the supply gap between declining
commercial fields and projected growth in demand.
Under our Macro Oils supply-demand
outlook over 22 million b/d is needed from new developments by 2025 to
meet demand. We expect the pre-FID pipeline to contribute around half of
this. However, the number of deferred pre-FID projects is
growing as the oil price remains low. Without significant structural
cost deflation, the majority of these projects, are at risk of further
delay or a major overhaul of development plans.
Prices need to support the development
of the next tranche of supply. This breakeven analysis provides support
for an oil price floor in the longer term of above US$70/bbl.
Deepwater at greatest risk
Deepwater and ultra-deepwater projects sit high on the cost curve and are at greatest risk of delay. Production from Angola, Nigeria, US Gulf of Mexico and Brazil
is at risk due to weak project economics. Over 80%, or around 16
billion barrels, of deepwater and ultra-deepwater reserves are
uneconomic at $60/bbl.
The economics are relatively robust
within onshore, tight oil and shallow water projects. In fact US Lower
48 is now the key low cost area and by 2025 contributes 70% of volumes
produced under $60/bbl.
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