Runaway costs and an acute shortage of skilled workers are putting future oil developments at risk and could keep upward pressure on the oil price, the chief executive of Total said yesterday.

Christophe de Margerie said that key projects planned by the French oil multinational could fall below acceptable rates of return if oil prices continued their sharp decline.

The soaring cost of offshore contracting and materials and a desperate lack of engineers have forced up sharply the price per barrel at which an investment in deep-water oil and gas production becomes profitable.

In only four years the cost per barrel of big installations has tripled, according to the French company's figures, raising questions about the viability of future large investments in the event of a continuing decline in the oil price.

According to Total, the price at which oil achieves a return of 12.5 per cent has risen from less than $20 a barrel in 2004 to $70 a barrel today.

“We need a price of $70 per barrel to make it work in Angola,” Mr de Margerie said. “For heavy oil, it is not far off $90 per barrel.”

His comments came as the price of Brent blend, the benchmark crude oil, sagged below $100 a barrel yesterday. Oil traders shrugged off a move this week by Opec, the oil exporters' cartel, to curb production, and hurricanes in the Gulf of Mexico pushed Brent down to $97 a barrel before it recovered to $98.37.

Deep-water oil exploration, such as Total's projects in Angola and the recent large discoveries by Petrobras in Brazil, have been hit by the soaring cost of steel contracting and the lease rates on high-tech drillships, which has risen to more than $500,000 (£286,000) a day.

Analysts estimate that the value of Iara, a giant discovery announced yesterday by Petrobras, will be only $5 a barrel because of the heavy costs. “It is one of the reasons why oil prices probably won't come down,” an analyst for a leading investment bank said.

Costs are at the heart of an argument between Total and the British Government over the development of a cluster of West of Shetlands gasfields.

Total wants a simple low-cost solution but government officials are advocating a big offshore hub that would encourage future projects. Total hopes for a decision next month.

Mr de Margerie said he expected that global oil output - 87 million barrels a day at present - would continue to be constrained by politics and conflicts and would not rise to 130 million barrels per day (bpd) to meet demand predictions from the International Energy Agency.

He said: “We still keep our target that peak production will be below 100million bpd. The figure we are using is much more 95 million bpd than 100 million.”

Mr de Margerie said that the oil industry was partly to blame for an acute shortage of skilled workers. He said: “We have two big challenges: research and development and training and skills.” The French company is investing $7.5 billion over the next five years. Total reckons that it can raise the average oil recovery rate from a reservoir from 35 per cent to 45 per cent.

The skills shortages affect the industry's ability to deliver on big projects, the Total chief suggested. “This gap means decreasing efficiency. People are not as efficient as they used to be,” he added.

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