Quote:
Originally Posted by Shazam
What does the price of gas have to do with oil?
Multi-million dollar profits do not represent an adequate rate of return on the capital invested.
Shell's Albian project is break-even at $75. Let's say oil becomes $70. Why would you bother digging the stuff out, only to lose $5 on each barrel?
Again, it's about rate of return. Break-even is useless to Shell's bottom line. So is anything that's below conventional oil rate of return.
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Actually that's a break-even full-cycle cost. Meaning that in order to make a return on all the capital they have already spent they need about $75/bbl to make it go. However they have already spent all that capital and they make an operating profit at anything over $35-40/bbl. There's a real option in keeping it running because they still make money on their operating capital. So it's not like any of those mines are going to shut down anytime soon.