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Cost of shale projects drops significantly from 2013

The World Bank released their big commodity markets outlook late last week, which shows how the average per-barrel cost for U.S. shale projects to be economic has come down a lot.

Data: World Bank, Commodity Markets Outlook, October 2017, Rystad Energy NASWellCube Premium; Note: Breakeven price is based on wellhead costs and does not include test activity; Chart: Andrew Witherspoon / Axios

The lower break-even costs stem from a suite of factors, like technological improvements to how much service companies charge, which fell when oil prices tumbled.

Why it matters: That steep downward slope is one reason why U.S. drillers, especially in the Permian Basin, has become a persistently strong competitor to Saudi Arabia and other big producers.

  • In addition, the attractive economics of shale could sap industry interest in developing Arctic offshore and onshore regions that the Trump administration wants to make available — regions with potentially vast resources but that also require lots of capital to explore and develop.

Yes, but: "While shale companies are expected to continue to achieve efficiency gains, they are starting to face cost inflation for some inputs, especially skilled labor," the World Bank notes.