Analysts: Cost Inflation Could Threaten Improved Economics For Deepwater Oil Projects
The average pre-final investment decision breakeven dropped to US$49 per barrel of oil equivalent (boe) today compared to $78/boe in 2014, according to a report released Nov. 27 by Wood Mackenzie. Carrying out lessons learned during the most recent market downturn, some operators have opted for fewer wells, more phases and tiebacks to existing infrastructure while seeking lower rig rates and supply chain costs, drilling better wells and utilizing technology to control expenses.
BP, for example, cut costs for the Mad Dog Phase 2 project in the deepwater U.S. Gulf of Mexico (GoM) by more than half. Focusing on value, industry solutions and collaboration with its partners BHP and Chevron USA Inc. affiliate Union Oil Co. of California, the operator chopped the massive 33-well $20 billion development down to $9 billion with up to 14 wells.