Oil and gas operating costs in the U.S. shale basins have come down recently following a drop in crude prices, BP’s head of upstream Bernard Looney said on Feb. 5.
Costs of drilling, labor and materials such as sand in shale fields rose last year amid a surge in output, particularly in the prolific Permian oil basin straddling Texas and New Mexico.
But a near 40% drop in crude prices in the last quarter of 2018 has helped reverse the rise in service costs, Looney said.
“We’re not seeing inflation around the world and in fact, even in the Lower 48, we are now beginning to see deflation again as prices have come back down,” Looney said in a analyst call after BP reported a doubling of profits in 2018.
BP became a major shale oil and gas producer following the acquisition of BHP’s onshore U.S. portfolio, known as the Lower 48. Its production rose to 349,000 barrels of oil equivalent per day (boe/d) in 2018 from 297,000 boe/d the previous year.
BP’s global production costs dropped by 45% from around $13.10 per barrel in 2013 to $7.24 last year, Looney said.
The career oil and gas man has put his money on U.S. natural gas via Comstock Resources Inc. and the Haynesville Shale.
Oil well productivity in Texas's Permian Basin—the country's largest oil field—is falling, and the number of drilling rigs operating in the U.S. has declined for six straight weeks.
Oil and gas producer Apache said on April 23 it would delay natural gas production from its Alpine High assets in the Permian Basin due to "extremely" low prices.