Available data for conventional and
unconventional oil and gas production around the world demonstrates a diverse
array of operating and capital costs.
Based on several of the more recent
sources cited above, It must be noted that the curves for oil and gas are
static and therefore do not take into account the tendency of technological
advancement to reduce costs over time.
As seen in Fig. 3 the largest
quantities and lowest production costs of oil are located in the OPEC
countries. The cost range might be from
less than $5 per barrel to around $30.While development of unconventional oil
is somewhere between $20 to $90 per barrel of oil equivalent (boe).
The capital cost increases seen
for offshore development are basically because of the higher cost of platform
drilling, the cost of new technology to cope with depressurization of
reservoirs, and the cost of pipeline transportation.
The Canadian Energy Research Institute carried out a study on
oil sands production costs and indicate that breakeven prices are in the range
$30 to $100 per boe,(CERI, 2013).
Rystad Energy (2012) and Rodgers
(2013) provides a breakeven cost range of about $36 to $92 per boe for North
American shale oil production. However, service company Baker Hughes has warned
that production could slow, even in the higher quality shales of North Dakota
and South Texas, if oil prices were to fall below $80 per barrel (Reuters,
In spite of the fact that the
concentration of this paper is on petroleum. Biofuels, coal-to-liquids and gas
to liquids are substitutes for oil though are currently high-cost. Continued
demand for liquids-based energy services is expected to induce technological
progress that should lower costs in the future.
As shown in Fig. 4, the lower production
cost ranges of conventional and unconventional gas are commercially viable
assuming current gas prices in Europe ($8 to $10 per thousand cubic feet mcf)
and Asia ($12 to $18 per mcf). In some cases, the costs of producing
unconventional gas are lower than those of conventional gas.
Regarding to the concerns by some
about depletion and excessively high energy prices, it appears that
conventional and unconventional petroleum resources are more abundant and
economic than often assumed. Although short term shortages do occur, the
resulting high prices spur investment in exploration and reserve growth.
The technological developments
witnessed over the past several years, specifically for unconventional oil and
gas, have led to increased production and have prevented petroleum from
becoming excessively expensive. Governments would have to take significant
measures such as setting up functional and transparent regulatory and
environmental regimes to permit development of petroleum.