Action needed to stem decline

20/12/2007 Producing fields on the Norwegian continental shelf will remain very important for value creation by the petroleum industry for many years to come. But maintaining output is not a matter of course.

text: Torsten Bertelsen

Forecasts indicate that it will be 2025 before petroleum resources in prospects, discoveries and fields still not on stream are more important for output than existing producers.

Record oil and gas prices mean huge revenues for the Norwegian community and petroleum sector.

The fly in the ointment is that crude produ­c­tion on the NCS is declining more rapidly than the oil companies had previously expected.

With some simplification, it can be said that players on the NCS were too pessimistic when production rose towards plateau, and generally overoptimistic after key fields went into decline.

Other oil provinces have also experienced a stronger fall in oil output than expected. Forecasts on the UK continental shelf – more mature than the NCS – have also proved too positive.

In Britain, over-assessment of reservoir properties and delays in bringing new fields on stream have been cited as important reasons for downgrading production estimates.

Similar factors apply on the NCS, where the NPD database has also revealed that the companies are behind schedule with drilling plans for production and injection wells.

The companies themselves say that wells are being shelved or postponed because of a lack of specialist personnel, equipment and – in some cases – rigs.

If the production decline can be recouped later, there is less cause for concern. A more serious worry is that lack of well work could lead to reservoir changes which may put resources beyond recovery.

Higher oil and gas prices have boosted activity in the petroleum business. Many employees in this industry and associated sectors have enjoyed solid pay rises.

The consequences for many producing fields has been a sharp escalation in costs.

However, detailed analyses also show that some producing fields manage – even in a high-cost regime – to keep production expenses more or less constant, or even reduce them.

Such success stories are often underpinned by long-term efforts which began a number of years ago and have made the fields less vulnerable to capacity constraints and higher costs.

The NPD has long pointed to the potential of integrated operation as an important measure for boosting resource offtake and value creation.

Uncertainty relating to the future cost of oil and gas seems even greater today than it was a few years ago when prices were low. While the only way ahead then was up, scope now exists for considerable movement in either direction.

Opinion on future oil price trends is divided. The IEA believes they will never again fall as low as USD 20-30 per barrel, and foresees a long-term average of USD 65.

This optimism is not necessarily shared by all the oil companies. The price uncertainty could prompt the shelving of long-term investment. If that happens on the NCS, the downturn could be sharper than strictly necessary.

Piaf in brief :

  • The idea behind performance indicator analysis for fields (Piaf) is a new approach to systematising large volumes of data from producing fields off Norway.
  • This information is collected every year by the NPD and the Ministry of Petroleum and Energy, and actively used to analyse the condition of these fields.
  • The Piaf model is based on existing reporting from the operator companies for the government’s revised national planning budget and annual status reports.
  • The data are used by the NPD to rank fields in accordance with a set of criteria which comprise more than 100 different indicators. The latter embrace both historical information and plans in the short and long term. Results from Piaf are presented to the offshore operators.
  • This method helps the government to identify fields which face special challenges so that necessary measures can be instituted. It also provides good understanding of challenges faced at Norwegian continental shelf level.
  • Piaf accordingly yields an overview of the field portfolio and the challenges facing the industry. Collating data from all the fields identifies worrying trends – project postponements, drilling delays, less injection than planned and lower production than expected.

Read more about some of these challenges and how they could be overcome:

Updated: 04/09/2009