The lower-for-longer oil prices are leading to the fastest drop in crude output of mature conventional fields in 25 years as companies cut spending on older fields, Bloomberg reports, citing figures by energy consultancy Rystad Energy.
Last year, mature fields across the world—which account for around one-third of global oil supply—saw their total output drop by 5.7 percent, the steepest decline since 1992. This year, the projected decline is around 6 percent, if the price of oil remains at current levels, according to Rystad Energy.
According to Bloomberg’s calculations, this year’s anticipated decline at mature fields would equate to 1.8 million bpd off the market—the same production volume that OPEC and partners have agreed to cut in their deal to draw down the glut.
“A lot of the focus is on OPEC and shale and not on the decline at these mature fields, where supply is struggling,” Espen Erlingsen, a partner at Rystad, told Bloomberg. “We’re starting to see the long-term impact of lower oil prices,” he noted.
The projected pace of decline at mature fields “is making OPEC’s life a little easier,” Erlingsen said, as quoted by Bloomberg.
Production from mature conventional fields in China dropped by 9.5 percent in 2016, triple the decline rate of 2015, according to Rystad. In the U.S., conventional fields production slumped by 8.3 percent last year, and 11 percent in 2015, compared to an average 4.1-percent decline in the five years before that, according to Rystad data. Related: Qatar Spat Worsens As Saudi-Led Arab States Vow New Measures
“This shows that the low oil prices are having an impact on production from mature fields, and that we see the non-OPEC, non-shale supply coming down,” Erlingsen told Bloomberg.
Not only is mature field production falling due to low investment in older assets, but the low oil prices have also led to drastic cuts in investments in exploration.
Earlier this year, the International Energy Agency (IEA) said that the volume of new oil discoveries hit a record low in 2016. The number of new conventional drilling projects also dropped to the lowest level in 70 years, potentially signaling a tighter oil market after 2020.
As if the rapid decline of legacy oil production in mature fields wasn’t bad enough, recent research of Rystad indicates that the world could run out of oil in either 13 years (proved reserves) or 22 years (proved and probable reserves) if no new oil was found.
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By Tsvetana Paraskova for Oilprice.com
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