A fast return, or not

A new offshore project can make its money back in a few years. In the Permian, it can take a year.

Half empty or half full?

So why have public oil company investors turned their back on places like the Gulf of Mexico and doubled down on the Permian Basin? Because life is short. People usually assume it must be a lot cheaper to get oil out of the Permian than in the Gulf. It is cheaper, but the breakeven prices in the Permian and the Gulf have actually been moving a lot closer together in recent years.

Here’s a mouthful: Full-cycle break-even costs. That’s the oil price companies need to recover costs for drilling a well and bringing it into production. In the Permian, it’s $42 a barrel; in the Gulf of Mexico, it’s $52 a barrel, according to Norwegian research firm Rystad Energy.

All things considered, those numbers aren’t that far apart. And U.S. oil prices settled at $67.25 a barrel on Tuesday.

So the real difference isn’t economics. It’s time. A new offshore project in shallow or deep waters will make its money back in six to seven years. In the Permian Basin, it only takes a year – down from 2 years in 2014, Rystad says.

So where the money goes will depend on investors’ outlook on the oil market.

“If they believe oil demand will need the project to come online in 2023 to 2025, then they should be confident enough to develop these offshore fields,” said Maierdan Halifu, senior analyst at Rystad in Houston. “But if they’re skeptical, then shale can be a source for them to turn profits quickly and go away if the price is very bad. It’s flexible.” — Collin Eaton

Opportunity knocks

Austin company Drone Pilot has operated as an emergencyresponse business for 15 years, performing search-and-rescue and other operations.

That’s why the federal government hired the firm in the aftermath of Hurricane Harvey to help take aerial videos for damage assessments and hazardous materials leaks.

That experience gave Drone Pilot the idea to start working with the energy sector, routinely conducting inspections and more of plants, refineries and even deep-water oil platforms in the Gulf of Mexico.

And that brought the company to this week’s Offshore Technology Conference in Houston for the first time, networking for new business with oil and gas companies. Drone Pilot will do the drone inspections for companies, but it also will train people at energy companies to conduct the inspections themselves.

“It’s fairly new to us, but we have interest from all over the world,” said Enrique Flores, an instructor for Drone Pilot. He performed drone demonstrations at the company’s outdoor booth.

The company will use standard-sized drones for onshore operations, but larger,militarystyle drones than can be 6 feet long for offshore operations where wind conditions are harsher. — Jordan Blum The best days in the past?

The offshore oil and gas industry’s recovery from the worst oil bust in a generation has been shaky — but the industry is unlikely to recover its previous share of the world’s production, according to DNV GL, a Norwegian research and consulting firm.

In 1980, the offshore industry was producing 45 million to 58 million barrels a day, and by 2010 that has risen to nearly 70 million barrels. But by 2050, as the global consumption of crude oil is expected to be on the general decline, DNV expects offshore industry to produce only 30 million to 40 million barrels per day. — Ryan Maye Handy