As the price of oil has approached $100/barrel, the U.S. media has had more frequent and detailed coverage of global oil supply issues. U.S. media have advanced the idea that oil demand is exceeding supply, and they have provided other explanations for the increasing price of oil, but they never mention that global liquid hydrocarbons production has been essentially flat since the beginning of 2005. Flat global liquid hydrocarbons production and the concept of depletion appear to be taboo subjects for the U.S. media.

One theme that has emerged in recent media coverage of oil supply issues is how global oil production could be increased, presumably more rapidly than it’s presently increasing. Suggestions include using advanced extraction techniques to bring retired oil fields back on-line, developing deepwater (>1000 ft) areas such as the deepwater Gulf of Mexico (GOM), and extracting oil from oil shale and oil sands. What the media fail to recognize is that there are factors that will counteract or limit the effect of their recommendations.

First, many of the world’s large oil fields are declining at rates of 10%/year or higher. Globally, the sum of the decline for depleting fields is probably 2-3 million barrels/day (mb/d) per year. Although considerable new production is brought on-line each year, new production is merely replacing lost production from declining fields.

When a large field declines at 10%/year or more, that constitutes a large volume of oil that is not easily replaced. As an example, the Cantarell complex produced about two-thirds of Mexico’s oil in 2004. It is now declining at an average rate of 10-15%/year. In the early years of decline, Cantarell will decline at greater than 150,000 b/d per year. Cantarell’s total production decline between 2004 and 2015 will be approximately 1.7 mb/d. Mexico’s production is declining and will continue to decline in spite of new oil fields coming on-line because the new fields are much smaller than Cantarell.

Second, retired fields brought back on-line are unlikely to produce 10% of their previous maximum production rate, even with advanced extraction techniques, and it’s likely they will produce much less than 10%. The rate of oil production increase from rejuvenated fields will be much less than the volume loss from declining large fields.

I expect that many retired Texas oil fields are being brought back on-line or have been brought back on-line in recent years due to the escalating price of oil since 2000. Texas’ oil production rate continues to decline in spite of rejuvenating retired oil fields. Peak production for Texas occurred in 1972 at 3.57 mb/d. The production rate for Texas has declined every year since 2000 with this year’s rate being ~0.914 mb/d, ~3.6% less than last year’s rate.

Third, although there is feverish development in the oil sands region of Canada, the rate at which production can be increased from unconventional oil sources is low relative to the rate of decline from depleting oil fields. Over the last 8 years, the oil production increase from the Athabasca oil sands was ~500,000 b/d while the production decline from North Sea oil fields was ~1,600,000 b/d.

Fourth, at no time in the foreseeable future will oil shale produce anymore than miniscule volumes of oil. At best, the net energy yield from oil shale development is only slightly higher than zero while that of conventional oil production from large fields is huge. That’s why production from large oil fields is so important.

Fifth, there has been intense development in the deepwater Gulf of Mexico for years. Higher prices will make oil developments more lucrative and make smaller fields economically viable but it isn’t going to greatly accelerate the rate of development.

It’s the big fields that matter in terms of high oil production rates for offshore areas. The big fields, even in ultradeep waters (>5000 ft), have been economically viable for years. Between now and the end of 2008, the oil industry is expected to bring 3 large deepwater GOM fields on-line (Tahiti, Thunderhorse and Atlantis), with a summed peak production of nearly 600,000 b/d. Beyond that, only one +50,000 b/d field is scheduled to come on-line through 2012. In the meantime, the older fields in the deepwater GOM will continue to decline, probably at rates greater than 15%/year.

Oil industry people are smart. They first look for oil in the most favorable locations to find the large fields. The U.S. government has already leased most of the geologically favorable areas in the deepwater GOM down to the Mexican border so it’s likely that most of the +100 million barrel fields have already been discovered. Deepwater GOM production should peak around 2010 in spite of future exploration and production developments.

Roger Blanchard
Sault Ste. Marie, MI