Offshore crude oil extraction, including deepwater, is closing in on shale in terms of cost thanks to new production technologies, a senior Chevron executive said at an industry event, as quoted by Bloomberg.

The company is laying pump networks on the ocean floor, connecting new wells with already installed platforms, cutting its costs considerably and bringing deepwater oil closer to competing with shale on an equal footing, vice president for upstream, Jay Johnson, said during a presentation at the Scotia Howard Weil Conference in Louisiana.

The upbeat attitude is not limited to Chevron executives, either. Transocean's chief executive, Jeremy Thigpen, said that at the moment, most of the 29 deepwater oil projects in the Gulf of Mexico have a breakeven level of between US$40 and US$45 a barrel.

Deepwater exploration was the object of much lament during the downturn as it is traditionally costlier than onshore conventional and shale exploration. Indeed, investments were slashed across the industry.

But now that prices have recovered somewhat, offshore explorers are back in the game and seem determined to stay despite shale.

Last year in May, Wood Mackenzie analysts reported that offshore drilling costs were going down, despite still weak oil prices, reflecting the efficiency of the strict cost discipline and the tech innovation drive that helped the oil industry weather the crisis.

In fact, Wood Mac said last May, by this year some offshore oil projects could break even if crude trades at US$50 a barrel.

Offshore is being helped by rising costs onshore, as well. A February report from Westwood Energy said that deepwater oil projects are becoming more competitive because the costs of shale drillers are rising on the back of growing frac sand amounts used per well that are pushing the market into a shortage, sending frac sand prices sky-high.

By Irina Slav from Oilprice.com
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