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Bob Dudley, in his 38 years in the oil industry, has never seen anything like what happened with BP Plc’s old fields last year: They gushed more crude.
“I cannot remember ever in my career having seen a negative decline rate,” the British oil-giant’s chief executive officer said in an interview on the sidelines of the CERAWeek by IHS Markit energy conference in Houston.
The fact that Dudley isn’t alone in seeing mature fields dwindling less than expected — and in BP’s case surprisingly increasing — means the Organization of Petroleum Exporting Countries has one more thing to worry about. As if the shale boom wasn’t enough of a headache.
Better results from legacy fields, also observed by producers like Royal Dutch Shell Plc and countries like Norway, further complicate efforts by petro-states like Saudi Arabia to push prices higher by curbing supplies.
Across the industry, the results weren’t as spectacular as BP’s, but still impressive, executives and officials at CERAWeek said. According to the International Energy Agency, production from mature oil fields dropped last year by about 5.7 per cent, the least in data going back one decade.
That comes as a huge surprise because the oil industry cut spending dramatically during the three-year downturn it’s just started to emerge from, and managing deep-water fields to arrest their demise can be a multibillion-dollar affair. So, OPEC was hoping thriftier times would lead to faster declines from mature wells that still account for more than half of the world’s output.
But the need to stretch each dollar spent is exactly why Big Oil is getting more from those fields, according to Wael Sawan, executive vice-president for deep water at Shell. The lower decline rates are part of the response to low oil prices.
“Companies are focusing on the basics,” Sawan said in an interview in Houston. “So there was a massive re-focus on existing wells. It’s the cheapest and most profitable barrel that companies can access.”
The Paris-based IEA highlighted two regions for their “remarkable” improvement: The North Sea and Russia. In Norway, decline rates slowed to 9.3 per cent last year, compared with 18 per cent in the early 2000s. Even at deep-water projects worldwide that traditionally show a faster decline, there was improvement.
Often, the key is simply to make sure the fields pump every day of the year, reducing downtime, executives said. Producers can, for instance, postpone maintenance to keep fields running.
“Oil companies with tighter capex budgets are striving to extract every last drop from mature assets,” the IEA said in a report presenting its oil supply and demand outlook for the next five years. “Small cash injections are in many cases yielding swift returns.”
Divided Industry
The industry is divided, though, about the sudden improvement in decline rates, with Dudley and other executives admitting they can’t guarantee another good year in 2018. Some even question the veracity of the data. Others, however, agree with Shell’s Sawan that the industry now has the incentive it didn’t have when crude was at US$100-plus a barrel to work harder on mature fields.
Despite the improvements, it’s still an uphill battle of massive proportions. Fields in decline produced 51 million barrels a day last year, according to the IEA. The ones that are still ramping up production contributed just 16 million to global supplies. Another 30 million came from unconventional sources, including shale and Canada’s tar sands, where production can remain steady for decades once mining operations have been set up.
In countries like Brazil and Mexico, the slowdown at old fields jumped to double-digit rates last year, but things could change there, too, as they lure multibillion-dollar investments from oil majors to help them develop their riches.
Bloomberg.com
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