Oil & Gas Exploration Costs Up 400%+ Since 2000, Says IEA Report - NZ Herald

Never have so many oil and gas companies spent so much to produce so little. That's the challenge facing Exxon Mobil, Royal Dutch Shell, BP, Chevron, Total SA and ConocoPhillips, which will spend a record US$98.7 billion ($127.41 billion) this year on exploration and production, Lehman Brothers Holdings estimates. Costs more than quadrupled since 2000 as explorers targeted more challenging reservoirs and demand rose for labour and material.

New supply from outside Opec nations will meet about 20 per cent of growth in world demand during the next four years, data from the International Energy Agency (IEA) show. The lack of supply has traders betting oil will remain at about US$120 a barrel for at least eight years, according to futures on the New York Mercantile Exchange. The wagers are buttressed by delays at fields including Kashagan, a Kazakh deposit where the budget has more than doubled to US$136 billion and the first production is eight years behind schedule.

Waters frozen half the year forced contractors to build artificial islands, while care must be taken to protect workers from deadly hydrogen sulfide fumes emitted by the wells.

"The future is going to be very trying for the international oil companies," said Robert Ebel, chairman of the energy programme at the Center for Strategic and International Studies in Washington. "There's no more easy oil for them. Kashagan is a shining example of the problems they face bringing new oil into play."

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