Analysis of Decline Rates (Part II)
In the first part, we tried to estimate the implicit decline structure behind the IEA analysis of worldwide decline rates. We established that only 11.8 mbpd of a total of 69.8 mbpd were not in decline in 2007 (17.0%) and for the Super-Giants/Giants group, the IEA claims that around 20% (9.2 / 42.5) are still growing fields. I'm now trying to answer the following question: is the decline structure observed for the world and the SG/G group closer to a pre-peak or a post peak production?
Based on the only field-by-field datasets publicly available (Norway and the UK) and looking at the decline structure we came to the following conclusion: If the decline structure for the world follows the decline structure that has been observed for UK+Norway, there is an 85% chance that the world's oil production is in final decline.
Observed Decline Structure for the WorldThe decline rates for post-peak fields established by the IEA are shown in Table I.
|Decline Phase 1||Decline Phase 2||Decline Phase 3||Total|
We then derived this possible decline structure for the post-peak fields.
|Decline Phase 1||Decline Phase 2||Decline Phase 3||Total|
Assuming then the repartition between the various decline phases is the same between small and large fields, we get the following:
Figure 1. Amounts of post-peak production by field category used for the global decline rate calculation.
The figure below is showing what I call the decline structure for the world.
Figure 2. Decline structure of the Super-Giant/Giant fields and the world.
Figure 3. Same as Figure 2 but in fraction of the total.
The feature that strikes me the most is how small the fraction of field
not in decline is (between 17% and 20%).
What the North-Sea Oil Production is Telling UsWe took the available data for Norway and the UK and we classified fields according to their production status at a given time (Figure 4).
Figure 4. Oil field classification for Norway and the UK.
Peak production for the North-Sea has been reached when production from
phase 3 fields reached 30% of the total production.
Figure 5. Total crude oil production (excluding condensates).
Figure 6. Same as Figure 4 but in % of total production.
On Figure 6, we can see that production plateau corresponds to fields not in decline between 20% and 30% which is higher than the value observed for the world (between 17 and 20%). Post-peak production is characterized by a fraction of fields not in decline below 30% and a fraction of fields in decline phase 3 above 25%. In addition, if we compute the correlation coefficient between the decline structure for the world (Figure 3) with the Norway+UK history, we get significant positive correlation values only for plateau and post-peak years.
Figure 7. Correlation values between the hypothetical decline structure for the world (Figure 3) with the decline structure history of Norway+UK (Figure 6).
There is strong linear relationship between the amount of field not in decline and the observed production growth/decline rate as shown on Figure 8 below. The linear fit intersects the 0% growth rate line around 27.5% which is therefore the threshold below which the observed production is likely to decline. According to this model, there is about a 85% chance that a fraction of 17% of fields not in decline is an indication of a post-peak situation.
Figure 8. Observed production growth rate versus % of fields not in decline (the colored areas from red to yellow indicate confidence intervals around the linear fit within 1.0, 2.0, 3.0 and 4.0 standard deviations). The vertical dotted red line indicates 17%.
The same analysis can be done when looking at the fraction of fields in phase 3. Also, the result indicates a high probability of declining production for values above 40%.
Figure 9. Observed production growth rate versus % of fields in decline phase 3 (the colored areas from red to yellow indicates confidence areas around the linear fit at 0.5,1.0, 1.5 and 2.0 standard deviations).
It seems clear, that from a North-Sea production perspective, the apparent decline structure for the world and the Super-Giants/Giants group does not look very good and indicates that we are in fact past peak. However, these charts are based on a very small field dataset (mainly offshore fields with strong decline/growth rates) whereas the world is believed to be composed of at least 15,000 individual field contributions.
What's the Implication for the World Production
The chart below is showing the observed production growth rate for the world since 1900. Values before the 70s were very volatile and around 7% and around 2%-3% after 1980.
Figure 10. Year-on-year total production growth the rate for the world (BP data). The red circles are the growth rates without Canadian tar sands.
In order to reconstruct a similar model for the entire world, I make the following assumptions:
- if 100% of fields were in decline, the total decline rate would be equal to the one estimated by the IEA for fields in decline (-5.1%).
- if 100% of fields were in decline phase 3, according to the IEA numbers, the total decline rate would be equal to -8.0%.
- if 0% of fields were in decline phase 3,the total decline rate would be equal to -4.5%.
- The maximum growth rate (i.e. 0% of fields in decline) is equal to the maximum decline rate (i.e. 100% fields in decline phase 3) in absolute value.
Figure 11. Possible situation for the world where the blue area delinates our present situation (17-20%). The black dots are the observed growth rates (Figure 9), their horizontal coordinate is a simple linear mapping of the production date on the 17%-100% interval.
Figure 12. Year-on-year total production decline rates as a function of the fraction of fields in Phase 3 decline.
ConclusionsThere are several possible conclusions:
- There are mistakes in the IEA report and my calculations are therefore completely wrong.
- The table II retrieved is erroneous. This is a real possibility, however the numbers for the Super-Giant/Giant fields are directly from the report and also indicate a decline structure consistent with a production in plateau or near decline. This decline is also consistent with a logisitc fit (see part I).
- If the numbers and estimates are corrrect, then it seems very likely that the world crude oil production is in decline or about to decline. The bottom line is that there is not enough contribution coming from fields with still a growing production to support a growing global production.