Program on Energy and Sustainable Development Working Paper #72
This paper develops empirical models for average oil production costs that represent the structural field-level and country-level determinants most characteristic for the new era beyond easy oil. These models lend themselves as a tool for forecasting the floor of structural cost trends related to the shift into more cost intensive fields that are increasingly producing heavy and extra-heavy crudes and that are located offshore and in countries fraught with high levels of political and environmental risks. Given the extremely limited availability of reliable, non-proprietary cost data, this model deliberately relies on high level factors for which data is publicly available for hundreds of fields from all oil producing states. This model specification offers the important advantage of enabling us to lever insights gained from this study in powerful out-of-sample estimations for the dominant scenario where data is available on field characteristics but not on costs.