Declining production from existing fields is the key determinant of future investment needs, both for oil…

mb/d

Global oil demand by scenario and declines in supply according to investment levels from 2019

bcm

Gas supply and demand outlook

6 000

Demand in STEPS

5 000

4 000

Demand in SDS

3 000

2 000

Additional sources of gas supply in the SDS

A significant tranche of the oil and gas production over the period to 2040, in all scenarios, comes from the reserves in today’s producing fields. These are the proven, developed reserves that are tapped by existing infrastructure. Production from these fields will decline in the future as the natural pressure in the reservoir starts to fall. This aggregate decline rate is likely the most important factor affecting future investment needs.

In general, a decline rate refers to the percentage reduction in actual production from an individual field or a group of fields over time. It can vary widely from field to field, according to their size, maturity, location, geology, geochemistry and development strategy. There are two main decline rates often reported. Our estimates for these decline rates are based on a detailed field-by-field decline rate analysis that takes into account the differences that exist across different field types, weighted by each field’s cumulative production.

Natural decline rate: the drop in production from all currently producing fields that would occur if capital investment were to cease immediately.

We estimate that the global annual average natural decline rate from all sources of oil production is around 8%.

Observed post-peak decline rate: in practice, decline rates are generally much lower than the natural decline rate since there is continued investment in producing fields. The observed post-peak decline rate is the compound annual decline in production from existing crude oil fields whose production has already peaked, but with continued capital investment in these fields. We estimate that the global annual average observed post-peak decline for conventional crude oil today is around 6.1%.

However, the observed post-peak decline rate still does not provide a robust description of the annual loss in production from the global oil balance, for a variety of reasons:

•The observed post-peak decline in fields producing in 2018 changes over time as fields become more mature.

•Less than 50% of global oil production today comes from post-peak conventional crude oil fields. The rest comes from conventional crude oil fields that have not yet reached their production peak,

NGLs, tight oil, extra-heavy oil and bitumen, coal-to-liquids, gas-to- liquids and additives.

•There are fields being developed today that will soon come online.

Taking into consideration these factors, we estimate that if no new oil fields were to be approved beyond those already under development, the average annual loss of supply to 2040 would be around 4%.

This annual loss of supply changes dynamically over time. For example, there are initially rapid declines in tight oil production, which are offset to some extent by increases in production from approved and ramp-up conventional crude oil fields. It then accelerates as more fields enter decline and as the pipeline of new projects begins to dry up. In later years, the annual loss of supply starts to drop slightly as it trends towards the average post-peak decline of large fields (which tend to decline more slowly than smaller fields) and as the initial decline in tight oil eases into a slower long-term decline rate.

The above figures are for changes in oil production, but the figures for natural gas are generally similar. We estimate that the natural decline rate for natural gas is around 7.5%, while the average annual loss of natural gas supply over the period to 2040 is 3.5%.

Billion dollars (2018)

800

600

New production capacity

Existing production capacity