Companies are having to work much harder to explore for oil and gas and it’s costing them more per barrel even after the downturn in drilling and other oil service costs in 2009. The latest 2009 figures from Evaluate Energy shows the Majors spent more per barrel on exploration (compared with their existing production) than in any previous year.
In the case of Royal Dutch Shell (LON:RDSA) , its exploration cost per boe of existing production has been much higher than its peers, underlining the seriousness with which the company takes its mission to repair the hole in its reserve replacement performance that came to light a few years back.
A similar pattern appears if you look at development costs and compare them with existing production levels but here a few companies – noticeably BP (LON:BP.) , ConocoPhillips (NYSE:COP) and Chevron (NYSE:CVX) – managed to actually reduce development costs in 2009.
If we now look at the trend in 3 year average finding and development costs we can see that ConocoPhillips overall has the highest F&D costs in 2009, followed by Total (NYSE:TOT) and Chevron. And some companies, notably BP managed to lower their 3 year average in 2009. Even a cursory look at the chart will tell you that F&D costs for the Majors has virtually doubled in the last 5 years.
Richard Krijgsman is CEO of Evaluate Energy a respected Oil and Gas Analysis software company who has been following the market for over 25 years. He is a frequent contributer to the Oil Blog.
