The Downside to Upgrading
Even in the best of times, worthy production projects do not get funded. Generally, those projects offering the highest financial returns get funded and the others are deferred, sometimes indefinitely. However, with the oil price collapse of 2014, oil operators had to become even more selective as to which investments to make. “Rigzone” reports that now the bottom third of oil fields are dying due to lack of investment, at the fastest rate in 24 years. Consequently, this could lead to supply problems in the future.
Typically, oil fields produce at an initially high rate, and deplete over time. Further investment might retard, or even reverse, production declines. At any given time, a third of the world’s oil production, about 30 million barrels a day (bopd) is from mature, conventional fields. To put this in perspective, this is about three times Saudi Arabia’s daily output.
Norwegian consulting firm, Rystad Energy, observes that production from this bottom third of oil fields fell by 5.7% last year, and will drop by at least that much in 2017 given current prices. The problem is especially acute in China. There, fully one-half of their production is from aging fields, where production fell off by 9.5% last year, three times the rate for 2015.
Globally, a decline this year at the rates Rystad predicts would result in a production loss of 1.8 million bopd. This is the same amount of the production cuts agreed to by OPEC and its allies last November. Fatih Birol, the executive director of the International Energy Agency has indicated that lack of investment in energy projects will probably result in a production shortfall within the next few years.
Patrick Gibson, with consulting group Wood Mackenzie, observes that for the time being, enough new projects are being funded to keep oil flowing. However, he cautions that “The key question is how long it will take for the lack of investments to have a greater impact on global oil supply.”
To read the article in its entirety, please go to http://www.rigzone.com/news/oil_gas/a/150946/oil_Fields_Pumping_a_Third_of_Supply_Die_Fastest_in_24_Years/ .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (email@example.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.