LONDON, Feb 5 (Reuters) – Oil and gas operating costs in the U.S. shale basins have come down recently following a drop in crude prices, BP’s head of upstream Bernard Looney said on Tuesday.

Costs of drilling, labour and materials such as sand in shale fields rose last year amid a surge in output, particularly in the prolific Permian oil basin straddling Texas and New Mexico.

But a near 40 percent drop in crude prices in the last quarter of 2018 have helped reverse the rise in service costs, Looney said.

“We’re not seeing inflation around the world and in fact, even in the Lower 48, we are now beginning to see deflation again as prices have come back down,” Looney said in a analyst call after BP reported a doubling of profits in 2018.

BP became a major shale oil and gas producer following the acquisition of BHP’s onshore U.S. portfolio, known as the Lower 48. Its production rose to 349,000 barrels of oil equivalent per day (boed) in 2018 from 297,000 boed the previous year.

BP’s global production costs dropped by 45 percent from around $13.10 per barrel in 2013 to $7.24 last year, Looney said. (Reporting by Ron Bousso; Editing by Mark Potter)