Total SA (ADR) (TOT), Exxon Mobil Corporation (XOM): Just How Expensive Is Shale Oil?

Bernstein further finds that, over the past decade, marginal production costs have risen by about 250%, from just under $30 a barrel in 2002 to a record of $104.5 a barrel last year, while cash costs have increased from $9.70 a barrel to $44.20 a barrel over the same time period.

The bottom line
The big takeaway is that the marginal barrel of oil is becoming more expensive to produce, which is helping buoy oil prices. But rising costs and lower profitability are a major challenge for the world’s largest integrated oil companies, which are struggling to boost production and reserves.

Most reported year-over-year declines in total oil and gas production for the first quarter, despite high levels of capital spending, which suggests diminishing returns from their upstream spending. According to energy research and consulting firm Douglas-Westwood, the upstream industry spent $2.4 trillion to produce 12.3 million barrels per day of additional oil output in the period 1995-2005.

Yet in the period from 2005 to 2010, the same level of spending actually yielded a decline of 0.2 million barrels per day. With unconventional sources of oil expected to account for a much larger share of total production over the next several years, energy companies will have to find better ways to get more out of their money.

The article Just How Expensive Is Shale Oil? originally appeared on Fool.com and is written by Arjun Sreekumar.

Fool contributor Arjun Sreekumar has no position in any stocks mentioned. The Motley Fool recommends Total.

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