Oil Prices: A look at production costs worldwide

Crude oil prices hit a 12-year low this week at $30, raising concerns over the possibility of further declines amid a global glut.

On Wednesday, Brent crude, the benchmark for exporters in the Middle East, managed to claw back some gains, and is trading at about $31.04 after flirting with $30 a barrel a day earlier.

After gradually reaching historic lows, $20 a barrel is no longer a fictional scenario, according to a research note published by investment bank Morgan Stanley. The bank partially attributed the slump to a stronger U.S. dollar.

The costs of production per barrel of oil provides clues about whether or not high-cost producers can survive the latest price crash, as well as the levels at which oil will bottom out.

Based on the latest study by Norway-based oil consultancy, Rystad Energy, Argaam has compiled data to shed light on crude production costs.

Oil prices at the current levels remain feasible for most producers when only looking at operating costs. However, they approach a critical stage when capital costs are factored in.

As a result, several oil companies have lately cut capital costs by 25 percent in 2015, and are expected to make similar reductions this year. This means curtailing allocations for explorations and drilling, cutting staff, and shutting down infeasible fields, which will eventually lead to lower global production.

Operating costs factor in expenses related to drilling, maintenance, salaries and freight, among other items. Capital costs include money spent on oil installations and infrastructure, the exploration, and refining operations.

However, expenses vary from one field to another in the same country; depending on its size, whether the drilling takes place onshore, offshore, in shallow, or in deep waters.

For example, average production costs in inland fields like Ghawar in Saudi Arabia— the world’s largest oil field— or in Kuwait’s Burgan, are considerably lower than deep-water drilling in the Gulf of Mexico, Brazil, or West Africa.

The table below shows the average cost of production per barrel in each country.