The precipitous drop in oil prices is putting higher-cost plays such as deepwater under the microscope. Key questions include: How will the industry energize deepwater developments to close the gap between cost and current commodity prices? What oil price is required to keep deepwater viable over the long term? These topics will undoubtedly be at the top of the mind for oil company executives over the months to come, and were the focus of a panel discussion at the Offshore Technology Conference (OTC) conference titled “Energizing Worldwide Oil and Gas Developments.” Also participating was Kassia Yanosek of McKinsey & Company, which provided break-even cost analyses and historical data on deepwater developments.
By reflecting on the past and looking at the current situation, the panelists explored scenarios on how deepwater breakeven prices can be brought down significantly.
The Past and Present
In the run-up to the oil price drop in late 2014, deepwater had spectacular investment and production growth. However, even then there were signs of increasingly challenging project economics. Global deepwater investment increased from USD 16 billion in 2003 to more than USD 70 billion in 2013 with production more than doubling in that time period to almost 6 million B/D, or 7% of the world’s total oil supply.
