Re: Reserve replacement, industry costs and the big IOC's
Posted: Fri 13 May 2016, 18:21:40
Zarquon wrote:"Anyway, I'm asking because a while ago I saw a presentation video by Steven Kopits (a presentation at Columbia Uni. IIRC, 2013 or 2014) where he stated that E&P costs in the industry had increased by about a whooping 500% in the last decade, a trend likely to continue, and that he wondered whether the big private players would still exist ten years from now, at least in their present form as industry giants. Back then I thought that to be a shocking statement."
One more thing. If we use Kopits data we can estimate (roughly) what it would cost to replace the reserves that are now being extracted. We have one good data point which is 2013, when the industry spent $75 billion to replace 4 Gb of the 32 consumed. That was $18.75 per barrel. Using Kopits 50% per year figure it would cost $142.38 per barrel in five years to discover another 4 Gb. All other things staying the same, it would cost $4.82 trillion to replace 4 Gb in five years. To replace the entire 32 GB being used will require 52% of the entire world's GDP in 5 years.
Obviously, the big integrated oil companies are not going to be around much longer. Of course, this is a linear interpolation of the data, and nothing is linear in the oil industry. If this function turns out to be exponential, which is likely, the cost could be 5 times the GDP of the world. Don't be fooled by the banna-rama commentary meant to distract you. The conclusions are simple, and straight forward.
One more thing. If we use Kopits data we can estimate (roughly) what it would cost to replace the reserves that are now being extracted. We have one good data point which is 2013, when the industry spent $75 billion to replace 4 Gb of the 32 consumed. That was $18.75 per barrel. Using Kopits 50% per year figure it would cost $142.38 per barrel in five years to discover another 4 Gb. All other things staying the same, it would cost $4.82 trillion to replace 4 Gb in five years. To replace the entire 32 GB being used will require 52% of the entire world's GDP in 5 years.
Obviously, the big integrated oil companies are not going to be around much longer. Of course, this is a linear interpolation of the data, and nothing is linear in the oil industry. If this function turns out to be exponential, which is likely, the cost could be 5 times the GDP of the world. Don't be fooled by the banna-rama commentary meant to distract you. The conclusions are simple, and straight forward.