More oil from old fields keeps the lid on costs
Buoyant production will make it tough for Opec to lift prices
Bob Dudley, in his 38 years in the oil industry, has never seen anything like what happened with BP’s old fields last year: they gushed more crude. “I cannot remember ever in my career having seen a negative decline rate,” says the British oil giant’s chief executive.
Dudley isn’t alone in seeing mature fields dwindling less than expected — and in BP’s case, even increasing — and that means the Organisation of Petroleum Exporting Countries (Opec) has one more thing to worry about.
Better results from legacy fields, also observed by producers such as Royal Dutch Shell and countries like Norway, further complicate efforts by petro-states like Saudi Arabia to push prices higher by curbing supplies.
Across the industry, the results aren’t as spectacular as BP’s, but still impressive, said executives and officials at an energy conference in Houston. According to the Interna- tional Energy Agency (IEA), production from mature oil fields dropped last year by about 5.7 per cent, the smallest fall in data that goes back 10 years.
That’s a huge surprise because the oil industry cut spending dramatically during the three-year downturn it is just started to emerge from.
But the need to stretch each dollar spent is exactly why Big Oil is getting more from those fields, says Wael Sawan, executive vice-president for deep water at Shell.
“Companies are focusing on the basics,” says Sawan. “So there was a massive re-focus on existing wells. It’s the cheapest and most profitable barrel that companies can access.”
The Paris-based IEA highlighted two regions for their “remarkable” improvement: the North Sea and Russia. In Norway, decline rates slowed to 9.3 per cent last year, compared with 18 per cent in the early 2000s.
The industry is divided, though, about the sudden improvement in decline rates, with Dudley and other executives admitting they can’t guarantee that this will be another good year. Some even question the data.
Others, however, agree with Shell’s Sawan that the industry now has the incentive it didn’t have when crude was at US$100-plus a barrel to work harder on mature fields.
Despite the improvements, it’s still an uphill battle of massive proportions.
Fields in decline produced 51 million barrels a day last year, according to the IEA. The ones that are still ramping up production contributed just 16 million to global supplies. Another 30 million came from unconventional sources, including shale and Canada’s tar sands, where production can remain steady for decades once mining operations have been set up. — Bloomberg