Earlier this week US major ChevronTexaco announced it was to buy fellow Californian company Unocal in a US$16.4bn deal that would expand its global reach and give it promising assets in Indonesia, Azerbaijan and the Gulf of Mexico.

Overseas analysts say ChevronTexaco's takeover of Unocal has been priced at an effective US$9.37 per barrel of proved reserves, almost twice the global industry's longstanding benchmark of about $US5 per barrel.

Industry veterans in New Zealand agree.

“I think the economists and the markets are beginning to awaken from their long slumber and realise the era of cheap oil is quickly coming to an end,” leading exploration consultant Steve O'Connor told EnergyReview.net.

“When oil prices hovered around the US$25 per barrel mark, which they have for the last decade, then US$5 per barrel was roughly equivalent to the after-tax profit for discounted proved reserves and therefore the cost to buy those reserves. ChevronTexaco is obviously betting the global oil price will be substantially higher over the next 5 to 10 years.”

But O'Connor added that companies active in the New Zealand E&P industry would not benefit as much from high oil prices as the cost to produce in New Zealand was much higher.

ChevronTexaco chief executive David O'Reilly this week said his company's higher per-barrel costs for reserves would be “competitive” with rival energy companies.

If oil prices remain above US$35 for the next six or seven years that would be almost US$9 per barrel higher than a recent US Energy Department estimate of US$26.41 per barrel through to 2012.