UK Oil production fell below one million barrels per day for only the second time in the last 30 years. The British sector of the North Sea pumped only 984,000 bpd of oil in June.
The dip in June was due to maintenance problems but normal production today is only slightly more than 1.0 mbpd. This is down from 2.7 mbpd at its peak in 1999.
People who don't believe in peak oil need only to look at places like the North Sea and its rapid decline profile to understand that every field declines and some decline at very fast rates.
Declining from 2.7 mbpd to 1.0 mbpd in only 11 years is an accelerated decline rate but it is typical of many offshore, harsh environment wells. Offshore deepwater wells are so expensive to maintain and contain such high risk while operating that wells are produced quickly and the facilities shutdown.
There are millions of barrels of oil still available in the North Sea but once the flow rates no longer support the cost of keeping the facilities running those wells are sealed and production stops.
Maintaining a set of producing wells along with a floating production facility is a very expensive proposition with hundreds of employees, support personnel, ships and tankers. Unlike an onshore well where it is tied into a pipeline and left unattended the offshore platforms can house hundreds of personnel and are constant maintenance headaches.
Britain first produced commercial quantities of oil in 1975 and the light North Sea crude known as Brent became a benchmark product in the international oil market. Britain reaped billions in royalties and taxes from the producers over the last 36 years. It was a net exporter of oil until 2005.
Unfortunately Britain's oil fields are running dry and more wells are being shutdown every year. The easily accessible offshore fields have been produced and those remaining are primarily natural gas and in hard to drill locations.
Michael Wittner, head of commodities research at Societe Generale said the country would continue to be an oil producer but at declining levels. "The long term trend will not be reversed." He added that recent increases in tax rates would accelerate the decline and reduce future exploration.
Oil & Gas UK said British oil and gas output could fall to around 500,000 boepd by 2020 or only 12% of expected demand. The publication said if enough outside investment was brought into the country output could be temporarily raised to meet about 40% of demand by 2020.
The UK oil and gas industry faces $40 billion in decommissioning costs over the coming years as those expensive to operate wells and platforms are closed.
I have written several times about the problems facing the U.S. in Alaska and the potential shutdown of the Alaska pipeline due to declining volumes. The pipeline originally transported more than 2.0 mbpd but volumes are now in the range of 500,000 bpd due to normal fields declines on the North Slope. As least in Alaska those are onshore wells and they can be produced at declining rates without the extravagant overhead of an offshore platform. Unfortunately the end result is the same. If new leases are not approved for Alaska the pipeline will be forced into a massive overhaul to allow it to transport at lower levels or a complete shutdown.
Depletion is a fact of life. In the Gulf of Mexico there are more than 5,000 production facilities the BOEMRE has ordered closed and removed. Most are no longer producing and are rusting hulks creating a traffic hazard and a potential pollution problem. The key point is these were once vibrant wells producing millions of dollars of gas and oil every day. The wells declined to the point they were no longer profitable to be operated and they were abandoned. Many of the owners are out of business.
This will happen to the new wells being drilled today. A decade from now many will already be abandoned and their production completed. Reservoirs only have a finite amount of oil and gas and once the first barrel is produced they begin their decline.
Multiply this by the tens of thousands of existing wells around the world and you start to get an idea of the complexity of the problem. Tens of thousands of wells are producing today and depleting at a faster rate than new wells being drilled to replace them. The oil industry is over 100 years old and most analysts believe more than 50% of existing oil in place has already been produced. That was the easy oil. The second 50% will be the hard to find, hard to produce oil that flows at much lower rates.
Every human on the planet is born, grows, prospers, declines and dies. That is the same scenario for every oil well on the planet. They are drilled with high hopes. They blossom into production then slowly begin their inexorable decline into oblivion. Onshore wells produce slowly and decline slowly. Offshore wells produce rapidly and decline rapidly. All the major new discoveries are offshore wells. Do the math.
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