[LONDON] Oil exploration costs will fall by a third by 2016, energy consultancy Wood Mackenzie said on Thursday, allowing firms to keep pursuing projects despite the near halving in crude prices since last summer.
While energy companies have been wrestling with rising costs for years, with many slashing capital investments after oil crashed from US$110 a barrel to less than US$60, Wood Mackenzie said that by next year exploration could actually rise.
"Whilst overall well numbers will dip this year, we expect recovery in 2016 as many explorers seize their chance to drill at lower cost," said Tom Ellacot, Wood Mackenzie's vice president of upstream research.
"Those that hold exploration spending flat or make only modest cuts could yet achieve 'more with less'.
If the forecasts prove accurate it could mean fears about lower oil prices cutting future output have been overstated. Oil prices for delivery in five years are currently trading above US$75 a barrel, more than US$17 above spot prices, due to concerns supplies may eventually tighten.
Wood Mackenzie said exploration costs would fall by 33 per cent by 2016 due to 'like for like' costs declining by 19 per cent, while simplifying activities and efficiency gains could save a combined 10 per cent.
The consultancy said strength in the dollar will also save energy companies around 4 per cent overall.