Never have so many oil and gas companies spent so much to produce so little.
That’s the challenge facing Exxon Mobil Corp., Royal Dutch Shell Plc, BP Plc, Chevron Corp., Total SA and ConocoPhillips, which will spend a record $98.7 billion this year on exploration and production, Lehman Brothers Holdings Inc. estimates.
Costs more than quadrupled since 2000 as explorers targeted more challenging reservoirs and demand rose for labor and material.
New supply from outside OPEC nations will meet about 20 percent of growth in world demand during the next four years, data from the International Energy Agency show. The lack of supply has traders betting oil will remain at about $120 a barrel for at least eight years, according to futures on the New York Mercantile Exchange.
The wagers are buttressed by delays at fields including Kashagan, a Kazakh deposit where the budget has more than doubled to $136 billion and the first production is eight years behind schedule. Waters frozen half the year forced contractors to build artificial islands, while care must be taken to protect workers from deadly hydrogen sulfide fumes emitted by the wells.
“The future is going to be very trying for the international oil companies,” said Robert Ebel, chairman of the energy program at the Center for Strategic and International Studies in Washington. “There’s no more easy oil for them. Kashagan is a shining example of the problems they face bringing new oil into play.”
The failure to develop new energy sources may drive crude to between $150 and $200 a barrel within two years, Arjun N. Murti, an analyst with Goldman Sachs Group Inc. in New York, predicted in a May 5 report.
Options contracts that allow buyers to lock in crude at $200 a barrel and expire in December on Nymex have soared more than 10-fold since January, including an 8.7 percent gain Monday.
Oil companies are turning to more technically challenging fields as oil-rich nations limit access. Russia is taking control of BP’s stake in the Kovykta gas field, a deposit in east Siberia big enough to supply Asia for five years.
Algeria has imposed a profits tax, and Venezuela seized four oil ventures from companies including Exxon Mobil and ConocoPhillips a year ago.
Drillers could access only 7 percent of known world reserves in 2005, down from 85 percent in 1970 after Middle Eastern nations took control of their fields, according to a July report by the National Petroleum Council in Washington.
The 13 members of the Organization of Petroleum Exporting Countries held 919 billion barrels of oil as of 2006, or 76 percent of proved global reserves, according to BP. Add Russia, the world’s second-biggest producer, and the total rises to 83 percent.
“Normally, high prices would mean higher supply,” said Fadhil Chalabi, executive director at the Centre for Global Energy Studies in London and a former Iraqi oil ministry undersecretary. “What is happening is something different. The international companies are denied access to areas of abundant oil within OPEC, and it’s getting costlier in other areas.”
The cost to find and develop a barrel of crude between 2000 and 2007 more than quadrupled to $18 from $4, said Andrew Latham, vice president of exploration services at Wood Mackenzie Consultants Ltd. in Edinburgh.
Demand in the period climbed 11 percent, or 8.8 million barrels a day, according to the IEA. Consumption will jump another 8.5 percent to 95.8 million barrels a day by 2012, the figures show.
— Bloomberg News