- Oil majors are pursuing projects with lower breakeven costs.
- The news projects are about half the break-even level for oil projects just a decade ago.
- Improving drilling and cost efficiency have allowed oil companies to eke out a profit at much lower oil prices.
The U.S. and global oil and gas sector is currently enjoying a third year of relatively high energy prices with oil demand on a steady growth trajectory. WTI crude has traded above $70 per barrel for the better part of the past 12 months, well above the $54 per barrel average breakeven price for U.S. shale basins. However, U.S. oil majors are not allowing high energy prices to lull them into a false sense of security, rankled by the memories of the historic oil price crash of 2020.
Oil majors are now hedging their bets by targeting new oilfields that can be profitable even at $30 per barrel oil, reflecting executives’ belief that high prices are anything but guaranteed.
“After three major oil price crashes in 15 years, there is wide acceptance that another one is likely to happen,” Alex Beeker, director of corporate research at energy consultancy Wood Mackenzie, has told Reuters.
The U.S. and global oil and gas sector is currently enjoying a third year of relatively high energy prices with oil demand on a steady growth trajectory. WTI crude has traded above $70 per barrel for the better part of the past 12 months, well above the $54 per barrel average breakeven price for U.S. shale basins. However, U.S. oil majors are not allowing high energy prices to lull them into a false sense of security, rankled by the memories of the historic oil price crash of 2020. Oil majors are now hedging their bets by targeting new oilfields that can be profitable even at $30 per barrel oil, reflecting executives’ belief that high prices are anything but guaranteed.
“After three major oil price crashes in 15 years, there is wide acceptance that another one is likely to happen,” Alex Beeker, director of corporate research at energy consultancy Wood Mackenzie, has told Reuters.
“There’s just a lot of oil being left in the ground. Fracking’s been around for a really long time, but the science of fracking is not well understood,” Exxon Chief Executive Officer Darren Woods has said. Woods has revealed that Exxon is trying to improve productivity and lower costs by fracking more precisely along the well so that more oil-soaked rock gets drained and also by keeping the fracked cracks open longer so as to boost oil flows. Luckily for the U.S. shale patch, there’s already a proven technology that allows oil producers to give existing oil wells a second, high-pressure blast to increase output for a fraction of the cost of finishing a new well: shale well refracturing. Refracturing is designed to restimulate a well after an initial period of production, and can restore well productivity to near original or even higher rates of production as well as extend the productive life of a well. New research from the Eagle Ford Shale in south Texas estimates that North Dakota’s Bakken Shale straddles some 400 open-hole wells capable of generating an excess of $2 billion if refractured with oil prices at $60/bbl. According to Garrett Fowler, COO for ResFrac, a refrac can be up to 40% cheaper compared to drilling a well and can double or triple oil flows from aging wells. BlackMask Pod Cast:
War Winds Down So Does Oil