North Sea Oil & Gas Output Now Projected To Be 10% Lower Than Thought Through 2010 - Financial Times

[hatrack]

EDIT

At the beginning of the month Alistair Darling, the trade and industry secretary, declared that 2006 was the best year for new finds of oil and gas for five years. There is still an estimated 16bn-25bn barrels of oil equivalent in oil and gas left to be extracted. But old wells that are running dry and new wells that are generally very small cast a shadow over the outlook for the North Sea.

Last year’s production of oil and gas was down 9 per cent at 2.9m boe a day, according to the association. That is already a steep fall from the peak in 1999 of 4.5m boe/d in 1999, and the lowest level since 1992. By 2010 production is expected to be down to just 2.6m boe/d.

The main reason, ominously, is described as “poor reservoir performance”: in other words, wells not yielding as much oil and gas as had been hoped. But also an increasing amount of resources has been diverted to maintenance on the ageing infrastructure of the North Sea, some of which dates back to the first oil rush of the 1970s. Capital investment last year of £5.6bn was the highest since 1998. But much of the increase seems to reflect higher costs rather than increased activity. Investment is expected to fall this year by 20 per cent or more, to £4bn-£4.5bn.

Demand for equipment and skilled staff has sent costs soaring worldwide, but the North Sea seems particularly badly affected. The cost of developing and operating a project rose by 45 per cent on average last year, from $15 per barrel of oil equivalent extracted to $22. During the next couple of years it is expected to rise again, to $25. Nor is the apparent good news about discoveries quite what it seems. The 2006 figure of 500m boe being found included one big find of about 175m boe. Typically, recent discoveries have only been of about 10m boe. The biggest oil finds in the world – the ones that get people excited – run into the billions of barrels.

EDIT

http://www.ft.com/cms/s/2c6bc00c-bb17-11db-bbf3-0000779e2340.html

[liberal N proud]

1. It will give them another reason to jack the prices

[GliderGuider]

3. Who do you think "them" is?

As we move into the era of oil depletion, pricing is set more and more on the demand side rather than the supply side. Buyers for desperate clients are more than willing to bid the price up to make sure they don't jeopardize their economies through lack of energy.

Gouging is the least of our worries.

[GliderGuider]

2. Substantial declines continuing

According to Wikipedia, North Sea production fell by 10% in 2004 and 12.8% in 2005. Now a further 9% in 2006. If this is any indication of what can be expected in Russia and KSA when they get going, oil importing nations are in for a world of hurt in the next decade.

[phantom power]

4. These declines have been quite steep, when they start happening.

10% a year in the north sea, 25% for Cantarell. It's really the worst nightmare. Dropping like a rock.