The marginal cost of producing U.S. shale oil will rise by as much as $15 a barrel to $95 a barrel in about 10 years, energy analytics firm Enverus said on Tuesday, as stagnating production pushes companies to drill in locations with fewer proven resources.
On average, it costs roughly $70 a barrel to produce a barrel of oil in the United States, Enverus said. Many producers need prices above $65 a barrel to turn a profit, according to a survey from the Dallas Federal Reserve, but prices have fallen below that level throughout this year.
“As core shale oil inventory in the U.S. depletes, the industry is entering a new era of higher costs and more complex development,” said Alex Ljubojevic, a director at Enverus Intelligence Research, a unit of Enverus.
“This shift will reshape the cost curve and redefine investment strategies across the continent,” Ljubojevic added. The U.S. oil industry has been laying off thousands of workers and cutting billions in spending due to lower oil prices and the biggest consolidation in a generation. A plateau or fall in output would diminish the United States’ sway in global markets and challenge U.S. President Donald Trump’s energy dominance agenda for the country. “North America’s dominance in supplying global oil demand growth is waning. Over the next decade, its contribution to consumption growth is expected to fall below 50% — a stark contrast to the previous 10 years when it supplied more than 100%,” Ljubojevic added.
(Reporting by Arathy Somasekhar in Houston Editing by Marguerita Choy)