The cost of replacing a barrel of produced crude has risen from $6 per barrel in 1998 to $27 per barrel in 2011 as exploration and production companies are forced to look to harsher climates and deeper seas to replace reserves and make up for declining production from mature fields, according to Lux Research.
Spending on exploration and production has recovered to pre-2008 levels as producers, excluding OPEC member countries and national oil companies, are expected to spend close to $270 billion in 2013, according to a Lux Research report.
The Race to Replace Reserves report, which will be released in full later this month, said spending is expected to reach $300 billion by 2020 and $400 billion by 2033. The increase in spending is being driven by declining production from the world’s largest fields, which is putting 12 percent of the world oil production at risk, and oil prices in a range that justify large capital budgets.
Production has remained relatively flat, despite the increase in spending, a signal that the days of easy-to-find oil are over, Lux Research said.
Global state recoverable oil reserves, including conventional and unconventional, total 1.65 trillion barrels, or 54 years of supply, the report said. Oil shortages could occur 18 years earlier than that if the figure is adjusted to include remaining oil reserves for population growth and nominal increases to per capita consumption rates, Lux Research said.
Technology will be critical to unlocking potential oil from resource reserves, such as the 4.6 trillion barrels of oil shale deposits and the 14 million metric tons of rare earth elements estimated to be in the US. If proved economical, these resource reserves could eliminate dependence on energy imports, Lux Research said. For example, replacement of oil reserves at a rate of 1 percent annually would fend off any oil shortages and supply a growing population for at least another 90 years.
Lux released some findings from its report in conjunction with the launch of its Exploration and Production Intelligence service, which will cover emerging technologies in upstream oil, gas and mining.