Accelerating decline in output from existing oil and gas fields: IEA

Declines in output from existing oil and gas fields globally have accelerated – largely due to a higher reliance on shale and deep offshore resources – but are lower in the Middle East than other parts of the world, according to a new report from the IEA

The new report, 'The Implications of Oil and Gas Field Decline Rates', draws on production data from around 15,000 oil and gas fields from around the world, and highlights the wide variation in decline rates across field types and geographies, with production from larger fields declining more slowly than from smaller fields, and offshore fields declining more quickly than onshore fields. The declines rates for the Middle East and Russia, which are home to the majority of conventional onshore supergiant fields, are therefore much lower than those elsewhere. This could mean that oil production from existing fields would become more concentrated among the OPEC member countries and Russia, who could see their share of global oil production rise from 43% today to 53% in 2035 and more than 65% in 2050, according to the IEA.

In Saudi Arabia and the UAE, where major upstream expansion projects are underway, production growth from approved projects, along with existing spare capacity and continued investment in existing projects, can more than offset the loss of production from natural declines, especially as decline rates are relatively low in both countries.

Onshore supergiant oil fields in the Middle East decline at less than 2% per year, while smaller offshore fields in Europe average more than 15% per year, according to the report. Tight oil and shale gas decline even more steeply: without investment, output falls by more than 35% over one year and a further 15% over a second year. The Middle East has the lowest oil post-peak decline rate at 1.8%, compared with global average annual post-peak decline rate of 5.6% for conventional oil and 6.8% for conventional natural gas.

IEA executive director Fatih Birol noted that nearly 90% of upstream investment annually is dedicated to offsetting losses of supply at existing fields. “Decline rates are the elephant in the room for any discussion of investment needs in oil and gas, and our new analysis shows that they have accelerated in recent years. In the case of oil, an absence of upstream investment would remove the equivalent of Brazil and Norway’s combined production each year from the global market balance. The situation means that the industry has to run much faster just to stand still. And careful attention needs to be paid to the potential consequences for market balances, energy security and emissions.”

The development of new resources would therefore be need to keep up the level of global oil and gas production. Even with continued spending on existing fields, more than 45mn bpd of oil and nearly 2,000 bcm of gas from new conventional fields would be required by 2050 to maintain production at today’s levels, according to the IEA.

The report also highlights that it has taken almost 20 years on average to move from issuing an exploration licence for oil and gas until first production. Around 230 billion barrels of oil and 40 trillion cubic metres (tcm) of gas resources have been discovered that have yet to be approved for development, mainly in the Middle East, Eurasia, and Africa. Developing these resources could add around 28 mn bpd and 1,300 bcm by 2050, the IEA says.