March 14 (UPI) -- The Lower 48 isn't the only area where development costs are moving lower, but the mentality of the industry may be changing on production, analysis found.
By next year, total U.S. crude oil production could average more than 11 million barrels per day and most of that is from shale reservoirs in the Lower 48. Shale oil and gas development has been more resilient to relatively lower crude oil prices than initially expected and federal estimates on production have been revised steadily upward over the past few months.
Four years ago, sector consultant group Wood Mackenzie expected about half of the total volume in new production would come from the Lower 48. That's now closer to 70 percent in favor of shale.
Harry Paton, a senior analyst in global supplies, said parity is starting to emerge across the sector, however, with some deepwater projects competing neck-and-neck with the Lower 48.
"World-class discoveries in Brazil and Guyana, for example, which have giant reserves and high-quality reservoirs, have project break-evens lower even than most tight-oil plays," he said in emailed comments. "In other, more mature sectors, such as the U.S. Gulf of Mexico or the North Sea, operators have made great progress in bringing costs down and lowering break-evens."
After heralding the seventh discovery offshore Guyana, a partnership led by Exxon Mobil and Hess Corp. estimate a production level of more than a half million barrels per day. Using floating production vessels off the coast of Brazil, French supermajor Total gained a stake in four fields that could combine for 250,000 bpd in oil production.
In the Gulf of Mexico, production started last month at the Stampede from a facility with a capacity of 80,000 bpd. Output from the Catcher field in the British waters of the North Sea started in late December and a peak rate of around 60,000 bpd is expected during the first half of 2018
Those production levels, however, mask some of the projects that fell off the table because of the lower price for crude oil, which is still about $40 per barrel less than it was in the middle of 2014.
"Operator mentality has shifted to 'value over volume'," Paton said. "This brings significant cost savings, but takes a chunk out of production for many assets."