@sofistek

A very valid point that you raise here on costs increasing as fiels are smaller. I will send your comment to the others oildrum contributors that are working on posts about supply and costs.

sofi,

In some cases it may be true that a smaller field could have a larger per bbl developemt cost than a mega field. But improved recovery technology has helped to lower costs significnatly also. IMO the bigger cost factor is where these "new" fields are found. Just consider the Deep Water exploration going on in the Gulf of Mexico and offshore Brazil.

I just yesterday I attending a meeting presenting a Deep Water GOM well I’ll be working on next Feb. The estimated cost is just shy of $200 million. And that doesn’t included completion or infrastructure costs. It truly took my breath away when it flashed up on the screen. Just last Sept I worked on a similar well with a cost estimate of $100 million but lots of trouble ran it up to $148 million. And the new $200 million price tag doesn’t include trouble time. On the good side, it's suppose to have nearly a 100% probability of success since it’s going to confirm a successful wild cat drilled a couple of years ago. On the other hand, this is the third “sure shot…can’t miss” well I’ve seen drilled in my career. And the first two missed.

These huge and long term projects require a good estimate of future oil prices to make the economic analysis viable. With the volatility we’ve seen in the last 10 months it’s easy to imagine how little confidence companies can have in their economic analysis these days. Finding oil is not enough…the numbers have to work out too. Today that analysis is pretty much down to a wing and a prayer.