There has been an abundance of studies and letters to the editor on oil decline rates in recent weeks. The latest article, based on a report from the International Energy Agency, was motivated because “failure since 2004 of non-OPEC production to achieve predicted output gains has created the impression that decline rates are accelerating (OGJ, Apr. 7, 2008, p. 34).” IEA studied hundreds of oil fields in decline and concluded that the net decline rate is 4-5%/year. In February, Cambridge Energy Research Associates presented the results of a decline study of 811 fields and came up with an average global decline rate of 4.5%/year. The key conclusion was that “there is no evidence that oil field decline rates will increase suddenly.” They claimed the study had filled in the missing link! The Uppsala Hydrocarbon Depletion Group studied 333 giant oil fields and came up with an average of 4.5%/year.
As the IEA report states, the fields selected had to be in sustained decline for at least 12-18 months. This is a general condition to apply the standard hyperbolic decline algorithms to wells, reservoirs, and fields. What if crude oil production has been flat, as has been the case worldwide since 2004? The decline rate is zero, according to the typical decline approximation normally used: (qi - q)/q, where qi and q are the production rates during the interval (year) of interest. But it’s a simple fact that the reserves continue to be depleted at a higher rate than if the production had dropped over the interval. The proper definition for aggregate decline rate must replace the production rates with the cumulative production values over the interval. In the case of the US, the approximation (using production rates) gives an annual decline rate estimate of 2%, whereas the proper rate is less than 1%. Worldwide, the aggregate decline rate is 2.5%/year. Physically, the decline rate declines linearly with depletion—it never increases—and much less suddenly (Sandrea, OGJ, May 22, 2006, p. 30).
Rafael Sandrea
President
IPC
Tulsa
