Monday, July 23, 2012

Median Breakeven for Tight Oil is $52 per Barrel

Many tight oil projects achieve payout of the capital invested very quickly because so much of the economic value comes out in the first year, he said. According to Peters & Co. estimates, a median tight oil project is economic, with a 10% rate of return, at around US$52 a barrel. _Financial Post_via_GWPF

Improved technologies for production of tight oil and oil sands will allow for more and more economical production of these formerly uneconomical forms of crude. By shifting to in situ production, for example, Canadian oil sands producers can reduce breakeven costs from above $80 all the way down to around $60 a barrel.

Now if Americans can either get rid of Obama, or convince Obama to sign off on Keystone XL and other crucial projects, they may revive their economy, while being able to temporarily go back to exporting oil.

And as long as North American tight oil projects provide rich profits as early as the first year, we can expect to see production in North Dakota and Texas continue to ramp up. This boom is likely to last for at least 10 to 20 years, if not longer.

North American tight oil (& gas) alone is not likely to change the world appreciably. But oil prospectors have barely begun to explore the tight source rocks of the world for their riches. Why should they, when there is so much conventional oil still being found in the hinterlands and deep under the seas?

But the resource is there, and likely to be much richer than currently assumed, when and if it is ever needed.

Finally, the US had best move quickly ahead with development of the next few generations of nuclear power technology. That will assure the world of several tens of thousands of years of abundant electrical power and cheap high quality industrial process heat.

Perhaps the Russians, the Saudis, and the Mexicans can get away with oil-based over-complacency, but Americans and Canadians had best stay on their toes.

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