Lifting Cost
Executive Summary
Key Takeaways
- ✓ Lifting cost is the operating cost of producing each barrel of oil equivalent from an already-developed field, typically expressed as a cost per boe.
- ✓ It is distinct from finding and development cost, which measures the capital cost of adding new reserves rather than the cost of producing existing ones.
- ✓ Lifting cost is one of the core KPIs used to assess a producing asset's operating efficiency, and typically rises as a field matures and requires more intensive recovery methods.
- ✓ Comparing lifting cost across assets without accounting for differences in field maturity and recovery method can produce a misleading efficiency comparison.
Definition¶
Lifting cost is the operating cost of producing each barrel of oil equivalent from an already-developed oil and gas field, typically expressed as a cost per boe.
Distinct From Finding and Development Cost¶
Lifting cost measures the operating cost of producing existing reserves, distinct from finding and development cost, which measures the capital cost of adding new reserves to the base. The two address different stages of the asset life and are read together, alongside the other metrics in Oil & Gas Financial KPIs, to assess a producing asset's overall economics.
Why Lifting Cost Rises With Field Maturity¶
Mature fields frequently require more intensive recovery methods, additional pumping, water or gas injection, or other enhanced recovery techniques, to sustain production, increasing the operating cost per unit of output as a field ages. Comparing lifting cost across assets without accounting for differences in maturity and recovery method can produce a misleading impression of relative operating efficiency.
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Frequently Asked Questions
What is lifting cost?
The operating cost of producing each barrel of oil equivalent from an already-developed oil and gas field, typically expressed as a cost per boe, covering costs such as labour, energy, and field-level maintenance directly associated with production.
How does lifting cost differ from finding and development cost?
Lifting cost measures the operating cost of producing already-developed reserves, while finding and development cost measures the capital cost of adding new reserves to the base, addressed together in Oil & Gas Financial KPIs. The two measure different stages of the asset life and should not be conflated.
Why does lifting cost typically rise as a field matures?
Because mature fields frequently require more intensive recovery methods, additional pumping, water or gas injection, or other enhanced recovery techniques, to maintain production, increasing the operating cost per unit of output over time.
What is a common pitfall in comparing lifting cost across assets?
Comparing lifting cost across fields without accounting for differences in maturity and recovery method, since a mature field's higher lifting cost does not necessarily indicate worse operating efficiency once its recovery stage is properly accounted for.
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Netback Price
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