Editorial

When will pre-FID oil projects be commercial again?

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70% of the pre-FID oil projects commercial at US$60/bbl

If prices remain at US$50/bbl, then most major conventional projects are at risk of deferral or cancellation. Which projects will breakeven and which will be profitable?

Pre-FID and US L48 future drilling cumulative production by breakeven in 2025 – by resource theme

When will pre-FID oil projects be commercial again?

With an emerging oil supply gap to 2025, more than 20 million barrels per day (b/d) must be developed by then to offset declines and meet demand growth emerging from a significantly slowed market.

Knowing where commercial development is most likely to occur — and at what prices will it break even — is crucial to guiding further investment decisions.

Over half of all new 2025 production breaks even at US$35-US$55/bbl

The low end of the global pre-FID cost curve is dominated by the US Lower 48, projected to account for 13 million b/d by 2025. With 9 million b/d breaking even under US$60 per barrel (bbl) and 60% of total development sourced from US tight oil, the Lower 48 will be critical to understanding the future supply curve.

The high cost of offshore drilling will remain high, with a handful of notable exceptions, such as Brazil's Libra field. But we expect only about 20% of new production to come from deepwater or ultra-deepwater development.

Beyond these breakeven metrics, funding and portfolio factors will play significant roles in whether projects become viable and when they come online. But with the number of projects achieving commerciality below US$75/bbl having doubled from our 2009 projections, a slow but sustained oil price recovery holds promise for investors.