Decline rates in oil and gas fields accelerate, requiring more investment - IEA

Investing.com -- The pace at which oil and gas fields lose output is accelerating worldwide, driven by heavier reliance on shale and deepwater resources, the International Energy Agency (IEA) said on Tuesday. As a result, producers must ramp up investment simply to keep global supply from falling.

The IEA’s new report, ‘The Implications of Oil and Gas Field Decline Rates’, analyzed production data from around 15,000 fields. It found that nearly 90% of annual upstream investment goes toward offsetting declines, rather than boosting output.

“Decline rates are the elephant in the room for any discussion of investment needs in oil and gas, and our new analysis shows that they have accelerated in recent years,” said IEA Executive Director Fatih Birol.

In oil, a halt to new upstream spending would now strip 5.5 million barrels per day from global supply each year, up from just under 4 million in 2010.

Natural gas decline rates have also worsened, rising from 180 billion cubic metres a year to 270 bcm.

Decline rates differ sharply by field type. Giant onshore fields in the Middle East lose less than 2% annually, while smaller offshore fields in Europe can see declines of more than 15%. Tight oil and shale gas drop even more steeply, with output falling by over 35% in the first year alone without reinvestment.

To hold production steady through 2050, more than 45 million barrels per day of new oil supply and nearly 2,000 bcm of gas from conventional fields would be required, the agency said — the equivalent of adding the combined output of the world’s three largest producers.

“The situation means that the industry has to run much faster just to stand still. And careful attention needs to be paid to the potential consequences for market balances, energy security and emissions,” Birol warned.

The IEA’s new report also highlights that it takes nearly 20 years on average from licence award to first oil or gas, with roughly a decade spent on discoveries and another on approvals and construction.