One emerging theme at CERA Week, currently underway in Houston, is the need for major oil companies to reduce capital expenditure amid range-bound oil prices and escalating costs. Chevron CEO John Watson reportedly said “One hundred dollars per barrel is becoming the new $20, in our business.” So ostensibly oil prices need to increase by 80% or oil companies need to drastically cut costs to ensure adequate margins, either way something’s got to give.

Douglas-Westwood analyst Steven Kopits came to similar conclusions in a recent presentation – read Breaking Energy coverage here.

Eni CEO Paolo Scaroni suggested the focus on unconventional resource plays, which reduce exploration risk but often cost more to develop than conventional discoveries, could be part of the problem.

And Woodside CEO Peter Coleman use a swimming pool analogy to explain cost inflation associated with Australian LNG project development:

“Everybody jumped into the pool at the same time, and we’re all trying to fight for the same floatable toys.” – Financial Times

It will be interesting to watch how the oil majors adjust their corporate strategies to deal with these challenging market conditions.