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Oil Replacement Costs Soar 350 Percent to $27 Per Barrel, Report Finds

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.

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5 thoughts on “Oil Replacement Costs Soar 350 Percent to $27 Per Barrel, Report Finds

  1. There seems to be a disconnect between the reality discussed in the first four paragraphs, and the rosy picture painted in the last 3 paragraphs.

    Energy economists such as James Hamilton, Jeff Rubin, and Fatih Birol point out that the economy spins into recession when oil prices rise to the triple digit level. Hamilton, from University of California, San Diego blogs at Econbrowser. Rubin, former chief economist for CIBC World Markets is author of Your World Is About To Get A Whole Lot Smaller and The End of Growth. Birol is chief economist for the International Energy Agency (IEA).

    The easy oil is gone, and what remains is expensive oil, as this article demonstrates, and we cannot afford that oil. As Fatih Birol has said, “we must leave oil before it leaves us.”

  2. What happened to the Alaskan Pipeline?
    We tax payers, who financed it, were told it would make the U.S. energy independent, forever!
    Last I heard it still maintains over 150 psi well head pressure, so it still can push its own oil through the tax payer pipeline to port off loading.
    We need not finance terrorists (OPEC oil). But, for some reason do.
    We need not drill everywhere, nor worry about such foreign peak oil, we have paid for our oil future – where is it?

  3. Inventor, Alaskan oil helped mitigate the effects of peak oil in the U.S., but did not reverse it. Production from Prudhoe Bay peaked in 1989 at 2 million barrels per day and is now producing less than half that amount. All of the rosy forecasts and talk about energy independence never come true.

  4. In 2008 Saudi Oil Minister Ali al-Naimi told 60 minutes it only cost $2 a barrel to produce their oil. It’s amazing that one can make the numbers do whatever one wishes.

  5. Inventor might also want to do some reading of history and unbiased sources to discover what lenghts America has gone to to secure its oil supply in the middle east and then decide who the terrorists are. I suggest John Pilger is a good start. Also how about thinking about more ways to use less of it rather than worrying about ‘where is my oil security coming from’. Then we really wouldn’t need to buy from ‘terrorists’ (sic)

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