Record levels of production & demand against a background of depleting fields
In a world making progress along a lower carbon emission path, oil and gas remain the leading energy sources. They are plentiful, accessible, cost-effective and – especially in the case of natural gas – cleaner-burning. That is why oil and gas provide about half of the world’s energy today and will continue to do so, according to the International Energy Agency’s most likely scenario for the decades ahead. Currently we see natural gas demand increasing in most places in the world. Demand for oil is increasing as well. In 2018, global oil supply surpassed the 100 million-barrels-per-day mark for the first time ever.
Our industry needs to invest to keep up with this rising demand, but there is also another challenge: field depletion. Historically, oil and gas fields outside OPEC have depleted by about 6% per year. Average OPEC field depletion is generally lower at 2% annually. See page 34 for a more in-depth view of depletion by Wood Mackenzie’s Pat Gibson.
Investments in enhanced recovery in depleting fields and the discovery and development of new fields can keep such production losses at bay.
Those are facts to bear in mind when reading this update of a report IOGP first produced in March, 2018. This second edition is based on more recent data drawn from the latest BP Statistical Review of World Energy of June, 2018, covering the previous year.
BP is an IOGP member, along with scores of other energy companies that together produce 40% of the world’s oil and gas. They operate in all producing regions: Africa, Asia Pacific, the CIS, Europe, the Middle East, North America and Central and South America. Like its predecessor, this report looks at regional production and demand figures for both oil and gas.
The specially-devised IOGP Production Indicator© for oil and gas shows to what degree a region can meet its own demand through indigenous production.
Once again, IOGP is grateful for the data and insights that our members
have provided for this report. As the figures and commentary show, for
long-term prosperity and security of supply, the world needs further
investment for responsible oil and gas production in each of the seven
Time to prime the pump
Read Wood Mackenzie's analysis (click here)
Investment needed to counteract field depletion
Oil and gas do not simply flow to the surface at a constant rate. They need a boost. The older a field is, the more effort is required to maintain flow rates. Such effort depends on continuing investment.
With a few minor variations, the historic rate of decline for non-OPEC oil fields is 6% per year. After a few years of somewhat lower decline rates, at Wood Mackenzie we expect a reversion to at least the norm after 2020. Even small changes in the decline rate can have a considerable effect on the market. For example, a 1% shift either way would increase or decrease the supply gap by 2 million barrels per day by 2021.
We base our decline rate analysis on fields that produce a total of 37 million barrels per day of liquids (including oil and condensates). This is 85% of total non-OPEC production, equivalent to just under 40% of global production. In all, we have looked at production from more than 5,300 conventional fields.
While field output depletion is set to return to 6% per year, demand for oil and gas is growing, as is the world’s population. Come what may in terms of meeting the world’s climate change goals, oil and gas will still be needed to meet between 48% and 53% of energy demand between now and 2040, the International Energy Agency says.
To ensure the availability of that oil and gas, continuing investment is needed to apply proven enhanced recovery techniques and improve efficiencies in existing fields and to find and develop new oil and gas fields.
Pat Gibson, Research Director Global Oil Supply, Wood Mackenzie
Wood Mackenzie’s report Non-OPEC decline rates: lower for longer is available in full from:
IOGP Production Indicator© (PI)
The IOGP Production Indicator© (PI) for oil is based on dividing daily production in thousands of barrels (or, for gas, billion cubic metres per year) by demand. The PI indicates the level of a region’s self-sufficiency (and export potential). A PI above 100% demonstrates the ability to export; below 100% shows the need to import.