The Decline of North Sea Oil and Gas: The end of an era? Chris Skrebowski
What we need to consider: • The quality and reliability of the data out there • The real state of play in North Sea production and reserves • The geopolitical significance of the North Sea • What things will be like in 2007
My background • 30 years of in and around oil journalism and analysis • An independent advisor to ASPO • Editor of Petroleum Review. (The opinions expressed here are entirely my own and do not necessarily reflect the view of the Institute of Petroleum.)
What does a journalist bring to ASPO? • Free of corporate pressure. • Free of political pressure. • A healthy scepticism. • Just like ASPO.
The Data Providers • The IEA - a victim of politics • The EIA - a victim of optimism • The USGS - an academic answer to a practical question • IHS -knows the answer for $1million • Oil companies - lots of data and some of it is true (honesty of the stock option holder)
The Three Wise Monkeys? • The Oil Companies • Governments and International Agencies • And all agree it would be best to • see no depletion. • hear no depletion. • speak no depletion.
Three reasons for denial: • Do you really want to • Kill your career? • Head the redundancy list? • Be blamed for starting the panic?
The North Sea. • We are very lucky... • Well documented - almost too much. • Mostly accurate - but often confusing • Norwegians - the most honest. • Britain - still finds it hard.
Like all hydrocarbon provinces the North Sea will have five phases. • 1) Opening up - 1967 - 1975 (exciting times). • 2) Rapid development - 1975 - 1990 (exciting times but some setbacks). • 3) Maturity and peak - 1998 - 2002 (like middle age, less exciting times). • 4) Decline - 1999 onwards (much less exciting times). • 5) Final abandonment - 2030 ? (last whimper).
The discovery and development in the North Sea was and is: • An outstanding technical achievement. • An outstanding business achievement. • An outstanding set of personal achievements by those involved. • A genuinely fine chapter in human achievement.
Why am I saying this? • Because its true • But also because many wish to characterise ASPO and those who talk of depletion as being: • Negative and defeatist • but REALITY IS REALITY • and DENIAL IS VERY FOOLISH
North Sea oil at peak production • Total production peaked in 2000 at 6.4 million barrels/day. • UK peaked in 1999 at 2.9 million b/d. • Norway peaked in 2001 at 3.4 million b/d. • Denmark et al peaking in 2003 at 0.47 million b/d. • At peak the North Sea was 9% of global production and 22% of Opec Production.
North Sea gas production is still rising • In 2000 North Sea gas production was 190bcm out of total European gas production of 290bcm. • UK was 108bcm and falling from 2000. • Norway was 54bcm in 2000 and rising. • Denmark was 8.1bcm in 2000 and rising. • The Netherlands was around 25bcm in 2000 and steady.
North Sea oil reserves in proportion • Middle East giants • Saudi 40-120 | Kuwait 10-60 | Iran 15-30 | Iraq 12-16 | UAE 10-15 (billion barrels) • North Sea • 2-5 (billion barrels) • The new great hopes • Angola 1-1.5 | Gulf of Mexico 0.5-1.0 | Offshore Brazil 1-3 | Azerbaijan 1-5 | Kazakhstan 7-9 (billion barrels)
North Sea oil reserves -What is left? • On ASPO total of 63 Gb we are already 60% depleted by end 2002 • UK 30 Gb recoverable, 19.6 produced, 5.4 in producing fields 5 to find or develop. • Norway 31Gb recoverable, 16.3 produced, 10.7 in producing fields, 4 to find/develop. • Denmark 3Gb recoverable, 1.33 produced, 1.3 in producing fields, 0.4 to find/develop.
Depleted giants • UK • Forties 94.9% Claymore 79.7 % • Ninian 94.5 % Statfjord 89.4 % • Piper 91.8% Beryl 78.4 % • Cormorant 85.2% Magnus 73.6 % • Brent 78 % Schiehallion 19.1 % • Norway • Statfjord 87.3 % Ekofisk 62.4 % • Gullfaks 85.6 % Troll (Oil) 30 % • Oseberg 78.8 %
Technology - a miracle cure? • No one aims to develop a field badly. • Every good trick installed from the start. • Recovery approaching practical maxima. • If small limiting cost is the well. • Reserves size limits outstep distance. • High Opex forces reserves to be left in ground. • Redevelopment of fields does occur.
The Historical Geopolitical role of the North Sea • Curbed Opec power by • pre-empting demand growth. • Reduced Europe’s import dependence. • Provided $multimillion income to governments. • BUT • Later this decade it will all unravel
DATELINE 2007 • Will there be any North Sea exploration? • A little mostly in Norway • Who will be exporting oil or gas? • Only Norway
DATELINE 2007 (cont) • The UK 2nd year of gas imports, 1st of oil • Denmark oil imports starting, gas exports ceasing • Norwegian oil exports down to 2.2mn b/d from 3.2mn b/d in 2001 • BUT Norwegian gas exports at 85bcm from 50bcm in 2001
DATELINE 2007 (cont) • Overall North Sea oil production down from 6.4mn b/d in 2000 to…... • Around 4.5mn b/d, 70% of 2000 level. • Overall North Sea gas production down from 190bcm in 2000 to…… • 170-180bcm with only Norwegian rising.
DATELINE 2007 (cont) • Will any major oil company be doing anything other than quitting? • Little or no productive exploration • Few if any new projects • Unit costs rising, flows declining • The new boys will know most of the answers and the rocks squeezed hard
Global Implications • North Sea decline is only what all provinces do - not special. • Once there are few surprises… • exploration stops… • developments stops… • the producing fields run down.
Global implications 2007 • According to ASPO figures by 2007 only Saudi, Iraq, Kuwait, Abu Dhabi, Kazakhstan, Azebaijan and Russia will be in any position to expand oil production and Canada and Venezuela Heavy oil production. • Can these really make up the increasing import requirements of all the others?
Conclusions • North Sea oil production is set to decline quite rapidly. • Norwegian gas output is the one brightspot but will it outpace UK gas decline? • Technology is unlikely to make more than a marginal difference. • Opec power will soar.
Remember - Bearers of bad news have a poor health outlook ASPO needs to be: • Clear • Rigorous • Unemotional
But for North Sea production • The only way is down.
Contact: Chris SkrebowskiInstitute of Petroleumcs@petroleum.co.uk+ 44 (0)20 7467 7117