OREANDA-NEWS. Norwegian state-controlled Statoil expects its net US offshore output to rise by more than 50pc by 2020 as the company lowers offshore breakeven costs to $40/bl.

Statoil expects production to rise to 125,000 b/d of oil equivalent (boe/d) by the end of the decade from 80,000 boe/d now, said Carri Lockhart, senior vice president for US offshore operations at a briefing. In 2014, the company's projects on average needed $70/bl to break even, but that has now dropped to as low as $27/bl in some cases.

About 10-20pc of that decline comes from lower commercial costs as oilfield services providers offer deeper discounts on rigs and other equipment. But the bulk of it is from re-engineering, simplifying designs and becoming more efficient.

"Deepwater is our bread and butter. It is not going away," Lockhart said. "Offshore is not dead for Statoil. This is really what we are good at."

Citing an example of cost reduction, Shell's 100,000 boe/d Vito project, in which Total is a 25pc partner, costs have declined from above $40/bl two years ago to close to $40/bl now, she said. The drop is primarily attributed to standardization and simplification of processes. Lowering costs has also become imperative to compete with the growing US onshore shale oil and gas resource base. The Vito project is expected to get sanctioned next year, she said.

"It is what we have to do to survive, to be competitive," Lockhart said. "It is what offshore has to do to compete. The whole industry is working on this."

Following Vito's success, Statoil will only aim for projects that are viable in a $40/bl environment, going forward. In a plan dubbed ‘fit@40' it expects to achieve this by partnering with services companies and engineering houses to come up with the best possible development kit for the project. It also plans to deploy more automation.