Norway produces "premium" North Sea brent crude oil which is priced even higher than U.S. WTIC (West Texas Intermediate Crude). Like all major oil producers, Norway has to constantly invest in exploration in order to offset its ever-dwindling non-renewable oil supplies. And like all current major producers, it's getting harder and harder to find new profitable reserves of oil to replace the highly profitable depleting sources of oil. They have to dig deeper and use unconventional drilling methods to find new oil. The profitability of oil exploration is a function of several key variables: drilling costs, operating costs, the cost of capital and the estimated future price of crude.
According to the article, drilling prices have DOUBLED in the past 10 years. Operating costs have risen 7% per year on average for the past eight years meaning they rose ~72%. Meanwhile, the price of Brent Crude is still over $100 per barrel and the cost of capital has never been cheaper thanks to Central Banks.
The Key Quote:
"The cost increase could threaten the profitability of future projects."
One less thing to worry about
In other words even at historically inflated prices and 0% interest rates, it's getting harder and harder to profitably replace existing reserves.
Brent Crude:
Fell from $147 down to $37.5 in 2008. And that was merely a warm-up for the real deal.
When the real collapse comes, oil buried deep down in the earth's crust may as well be on Mars.
The bottom line is that "we" can't really afford this ever-harder to obtain oil but that fact has merely been obscured by the Globalization bubble:
The bottom line is that "we" can't really afford this ever-harder to obtain oil but that fact has merely been obscured by the Globalization bubble:
