Energy and natural resources
Lifting cost
The cost of producing oil or gas from wells that already exist, per barrel.
Last reviewedWhat does Lifting cost mean?
Lifting cost (also called production cost or operating cost per barrel) is the cost of running existing wells and facilities to bring oil and gas to the surface: staff, power, maintenance, chemicals and well work. It leaves out exploration, the capital cost of drilling and building, depreciation, royalties and taxes. Example: a field spends 450 million a year on operations and produces 50 million boe, so its lifting cost is 9 per boe. Large Middle East onshore fields have some of the lowest lifting costs in the world, while deepwater and oil sands are among the highest. Because it ignores capital, lifting cost is far below the full-cycle breakeven.
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Related terms
- Full-cycle breakevenThe oil price a project needs to cover all its costs, including building it, and earn its required return.
- Barrel of oil equivalent (boe)A unit that converts gas into barrels of oil by energy content, so oil and gas can be added together.
- Variable costA cost that rises and falls with how much you make.
- NetbackWhat a producer keeps per barrel after transport, royalties and production costs.
- Fiscal breakeven oil priceThe oil price a government needs to balance its budget.
- Crack spread (refining margin)The gap between the price of crude oil and the prices of the fuels made from it.
- Decline rateHow fast production from existing oil and gas wells falls each year without new investment.
- National oil company (NOC)An oil and gas company owned or controlled by a government.