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November 07, 2016

Unit Cost of Global Oil and Gas Developments


Stratas Advisors

This excerpt is from a report that is part of Stratas Advisors’ Global Heavy Crude Oil and Global
Hydrocarbon Supply services.

To assess development costs (CapEx – Capital Expenditures) and operating costs (OpEx – Operating
Expenditures) of about 400 ongoing oil and gas development projects and producing assets, Stratas
Advisors created a cost study covering key categories of oil and gas upstream developments across the
globe. We analyzed and compared the average costs of these projects, weighting them by estimated 2P
reserves on a BOE basis. The following is a brief summary of the findings.
Costs by Development Type

Canadian oil sands, with a unit cost of about $37/boe, and a range of $28-$52/boe, top the list as the most expensive of current development types. Interestingly, US shale

plays follow relatively close behind with average unit costs of about $31/boe. It is only after considering the costly unconventional US plays that one then heads offshore

into the ultra-deepwater to find the next most costly development.

The GOM Lower Tertiary developments have an average all-in unit cost of $28/boe, with a huge range of $10-$56/boe (tiebacks vs full field developments), which tops all

other offshore deep and ultra-deep water developments around the world. Thanks to high well productivity, Brazil pre-salt developments have a fairly low development cost

of $17/boe. However, before getting that low, one must first consider other deepwater and ultra-deepwater. Heavy crude oil developments (projects with crude oil API lower

than 25) with an average unit cost of $16/BOE is next on the list. Other onshore and shallow water conventional developments are on the lower end of the cost ranking, with

unit costs of $6/ boe and $13/boe, respectively.

Canadian oil sands developments have the highest unit OpEx, which accounts for about 80% of the total unit
cost. The expensive processing costs of the high viscosity tar sand include bitumen upgrading to synthetic
crude oil. The transportation cost includes rail and/or pipeline transportation costs from producing sites in
Alberta to the southern coast of the US, where the heavy crude oil processing refineries are located. Similar
to oil sands, heavy crude oil projects also report higher processing costs (including blending and/or
upgrading), which drives up the OpEx to over 55% of the total unit cost.

In contrast, offshore developments are more expensive in terms of CapEx (about 60% of total), where the cost of

processing facilities (offshore platforms), subsea facilities and drilling and completion costs increases as the water depth

increases.

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