Just wanted to get people's feedback on an article from the latest Eureka Report
Particularly, could people check my analysis on the section shown below?
A case study is the relatively small Stybarrow oil project off the WA coast. Being developed as a joint project of BHP Billiton and Woodside Petroleum, Stybarrow has been designed to produce 80,000 barrels of oil a day.
But, when it was approved as a development less than two years ago, BHP Billiton’s half-share was budgeted to cost $US300 million. In July, that became $US380 million, a 26.6% increase mainly because of higher steel prices – which were primarily higher because of increased prices for iron ore.
The symmetry of the Stybarrow example is beautiful. On one hand, BHP Billiton gets the higher iron ore prices. On the other it pays more for its steel.
BHP costs $380m for 40000 bpd oil. At long term prices say $50 pb, and ongoing costs of $10pb, BHP makes $40pb. This gives $1.6m per day or about $600m per year. Doesn't this make a cost "blowout" of $80m paltry in real terms, eg they recover the additional costs in maybe 50 days production!?