By OGJ editors
HOUSTON, Mar. 18 -- The combined production decline rate for countries outside the Organization of Petroleum Exporting Countries is steadier and less steep than is generally believed, according to the International Energy Agency, Paris.
Failure since 2004 of non-OPEC production to achieve predicted output gains has created the impression that decline rates are accelerating.
In fact, IEA says in its March Oil Market Report, the aggregate decline rate for mature non-OPEC fields already in steady decline averaged 7.7%/year during 2000-07 and did not "accelerate markedly" during the study period.
IEA's analysis focuses on production of conventional crude oil and condensate from fields with sustained, yearly output declines for at least 12-18 months.
The agency believes the net decline rate for non-OPEC production, accounting for fields not in decline as well as those that are, is 4-5%/year.
"We believe that sluggish non-OPEC performance is being driven by other, largely above-ground constraints, not solely by resource depletion, important though this is for the longer term," IEA says.
The agency says decline-rate surges in 2005 and 2006 reflect distortions such as those caused by hurricane damage in the Gulf of Mexico, extended shut-ins in the North Sea, and asset divestments in Russia.
Decline rates are greatest in mature producing regions of the Organization for Economic Cooperation and Development, exceeding 15%/year in the North Sea, Australia, and offshore US.
Decline rates generally are greater for OECD than for non-OECD producers.
In the US and Canada, excluding mining and upgrading operations, they are about 5%/year.
"The surprisingly static overall profile of decline in OECD basins may actually suggest the beginnings of a price response on the supply side," IEA says. Renewed drilling and enhanced oil recovery might be starting to offset natural declines, it adds, although the effect may be limited by engineering shortages.
Average 2000-07 decline rates outside the OECD and in OECD Mexico vary from lows of 2.5%/year in the Former Soviet Union and 4%/year in China and Africa to 6-7.5%/year for Asia, the Middle East, and Africa.
The low aggregate FSU decline rate largely reflects the dominance of onshore production in Russian performance and heavy investment in mature Russian fields early in the decade.
And while Latin American declines are relatively shallow, IEA expects them to increase as declines accelerate in Mexico's offshore Canterell field and deepwater fields in Brazil's Campos basin.
The agency also notes acceleration of declines in mature fields of China, other Asia, and the Middle East.
Despite trends of individual fields and variations over the study period in data quality, IEA says it sees "no compelling evidence that aggregate decline is picking up speed after nongeological factors have been accounted for."
