Friday, July 1, 2011
The North Sea has been the poster child for the idea that with modern oil extraction technology, an oil producing region can decline really rapidly after it has peaked (the core idea is that when you put horizontal wells into an oil reservoir, versus vertical ones, the flow level remains high until the water below the oil reaches the level of the horizontal well, when production drops very rapidly. In contrast, with a vertical well, you get some degradation much sooner (as water starts coming into the bottom of the production zone), but the decline is more gradual as you slowly get more and more water and less and less oil coming from the rock into the well).
Anyway, I haven't checked up on production data there for a while. The graph above shows the total production of the three main countries involved: the UK, Norway, and a little from Denmark (data from BP). As you can see, production peaked in 2000 and has tanked since. If we look at the year-on-year growth rates, we get this:
You can see the very high decline rates reached in the early 2000s. After 2005, with sustained high oil prices, there was a moderation in the decline rate for a few years (some new fields came on, like Claire and Buzzard). However, 2010 was the worst year yet, with an 8.6% decline rate. There seems small doubt that this region is played out and will decline to very little over the next decade or two.