The Oil Drum: Europe

I would like to expand on the points you make about Kemp.  As you say he provided a range of forecasts based on different price scenarios.  For the sake of discussion, I will pick the $40 / bbl forecast (numbered as slide 38 in the handout).

Here he shows production rising from around 1.65 milion bpd in 2006 to 2.00 million bpd in 2007.  The actual decline in North Sea oil production (crude + NGL) in recent years is as follows:

2004  229,000 bpd = 10% decline
2005  220,000 bpd = 11% decline
Jan-Aug 2006 11% decline from equivalent period in 2005

So the decline pattern is fairly well established at around 10% and over 200,000 bpd.  The average daily production so far this year is 1.67 million bpd (Jan-Aug, 243 days).  It needs to be noted, however, that as production falls year on year the absolute decline decreases.

As we all know The Buzzard Field is the only significant development due to come on stream during 2007 with a potential maximum rate of 200,000 bpd.  In my opinion, if all goes well, this should be sufficent to arrest the decline in 2007 - i.e. the decline curve will move sideways for one year - before continuing on down in 2008.

In Kemp's forecast he not only shows production rising in 2007 by around 350,000 bpd, he shows no decline in 2008 either.  In my opinion this is likely to overstimate 2008 production by around 500,000 bpd.

For those interested in economics, 500,000 bpd is worth  almost $11 billion on an annual basis at $60 per barrel - so this will be the shortfall to the UK economy should Kemp be wrong and I (and others) should turn out to be correct - high stakes?

When I tried to speak with Kemp after the conference and explain that in my opinion, Buzzard would at best result in a shoulder on the decline curve for one year - he  said that was what his model showed - I have to disagree strongly with that, hos model does not show a shoulder it shows a sharp rise.

For the record, I believe bottom up approaches (Bentley, Kemp), top down approaches (Hubbert) and combinations (Campbell, Skrebowski?) all have a role to play.  Building in economics also has a role, but this has to be done in a realsitic manner.

My view on economics for the short term is that it is unlikely to have a major impact.  If the oil price went to $100 / bbl tomorrow would it result in increased production next year?  I very much doubt it because the indutsry is currently man-power, materials and drilling rig constrained.  Production will only rise with price if more wells can be drilled.

The other area where price impacts is in delaying decomissioning and new investment in old fields.  Forties is held up as a shining example of investment leading to higher production. Great stuff Apache!  But the increased production from Forties is already in the figures quoted above.  Without investment projects like Forties every year, decline may accelerate.

For those who may be wondering where I derive my authority from to talk on such matters, I have a BSc and PhD in Geology, during the 1990s the company I ran worked on the vast majoirity of new field developments in the UK and Norway, as well as hundreds of field-based studies all over the world, I have attended reservoir engineering courses, ran courses for oil companies and so on.

I have posted three substantial articles on UK and EU oil reserves on TOD, and had these reveiwed by senior petroleum geology staff before they were posted.  I will be the first to admit that this does not quite measure up to full peer review, but I have been trying my best to provide an objective and verifiable opinion.  If any one wants to discuss these articles further then post comments on this thread.

Oil export - import model for the UK

EU oil import set to grow by 29% by 2012

Lies, damned lies and Government Oil Production Forecasts

A final word, I plan to start an occasional series of posts that tracks UK oil production in comparison with the DTI forecast, Kemp's forecast discussed above, and my own approach described here