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The decline of the era of oil at the end
Material posted: Publication date: 07-03-2018
The increase in proven oil reserves worldwide are declining with companies cutting back on exploration and strive to develop the most accessible deposits. Easy oil is already found, and hard to develop expensive and difficult. Against this background, oil production in Russia may fall by 8% by 2025.

The oil crisis

The oil is being pumped out of the ground faster than producing countries open up new fields. Currently, the growth of reserves is at the lowest level for the last 65 years. "In 2017, the replacement level was only 11%," — said the Russian Minister of ecology and natural resources Sergey Donskoy.

Experts attribute the low replenishment of oil reserves with the situation on the world market.

Vospalitelnost reserves is largely dependent on oil prices, in addition, it also depends on their recoverability, senior analyst at BCS global markets Cyril Tachennikov.

After 2014, the price of Brent crude has fallen from $112 to below $60 per barrel, many oil companies were forced to reduce investment in the development of new deposits, not to mention exploration.

The continuing decline in oil prices in 2015-2016, also did not add optimism in this matter.

The increase in reserves in the world in 2014, followed by a decrease in exploration activity decreased almost two times — up to 6.7 billion barrels of oil equivalent, draws to the attention of senior consultant at VYGON Consulting Darya Kozlova.

In conditions of low oil prices the company under the management of the asset portfolio begin to reduce investments in risky projects, which include just exploration, says the expert.

Currently, the main oil-producing countries are fighting for the reduction of commercial reserves of extracted hydrocarbons, the balance between supply and demand and stabilizing the oil market. With the end of 2016 27 countries, including OPEC members and anyone in the cartel is not included, trying to rectify the situation by reducing the daily production of 1.8 million barrels. Each of the countries in this regard, the decision took on a certain amount of commitment and tries to complete (the deal OPEC+). And discipline in this matter, according to official figures, is very high. And due to the reduction of production in suffering from the deep crisis of Venezuela the OPEC deal+ runs at 115-120%.

In this situation the key players in the oil market has no time to engage wspolnoty stocks.

Expensive and difficult

For modern petroleum production is typical that the accumulation of unrecoverable inventory ahead of the growth of reserves recoverable, that is, in General, the oil trying to get quickly, at least cost and to advance to the next field, notes the analyst of "ALOR Broker" Kirill Yakovenko.

An example is the Samotlor oil field, which was intensively exploited during the Soviet years. However, because of intensive mining in the 1980s, oil-bearing strata began to be alternatevely, and oil production fell sharply. And although stocks of oil remain high, they are hard to recover, and to develop Samotlor even introduced a special tax regime.

The international energy Agency (IEA) in its report "forecast of the world energy market" in 2008 noted that the volume of oil production on the world's major oil fields is declining faster than previously thought, and without additional investments the annual natural production decline will amount to 9.1%.

Easy oil is already found, and to search for new hard, notes a leading analyst Amarkets Artem Deev.

The probability of discovery of a giant and large fields in the world is now small, and if it is, then the unexplored deep-water areas of the shelf that requires a huge capital funds and makes development unprofitable at current oil prices. You also need to consider the fact that the field operation usually takes four to five years, emphasizes senior analyst of Energy center business school SKOLKOVO Artem Malov.

The main potential for the search is currently focused on expensive deep offshore and the Arctic, which in General speaks about the deteriorating resource base in the world, agrees Kozlov.

According to estimates Deeva, drilling one well on the Northern shelf of the costs in the amount of $1 billion, which is not always economically feasible, because only one in 10 exploratory wells yields commercial flow in new areas of exploration

A negative signal is also a decline in the average size of discovered fields with 150 million barrels of oil equivalent (b.N. e.) in 2012 to 100 million b.N. e., according to Rystad Energy, adds Kozlov.

Last spring, the IEA presented a five-year report Market Report Series: Oil 2017, which presented its own vision of the situation on the world oil market up to 2022. IEA experts warned that

if in the near future investment in the oil sector is not restored in the previous volumes, then after three years, the demand for oil may exceed supply, and prices to skyrocket.

Earlier, analysts noted that in 2016 the volume of investments in exploration and production in the world remains 40% below the level in 2014.

If the current levels, probably in 10 years we can face a smooth decreasing supply of oil on the market, says Malov.

How much is left?

Security proven reserves, production is now more than 50 years, reminds Kozlov. According to estimates by BP, the development and introduction of new digital production technologies will allow to increase the technically recoverable reserves by 35% to 4.8 trillion b.N. e by 2050.

Russian oil companies are also increasing their investment in exploration.

According to the Ministry of natural resources, in 2017 they reached 314 billion rubles. In 2013, this figure amounted to 216 billion rubles, in 2014 — 320 billion rubles, in 2016 - about 260 billion rubles. From the Federal budget for geological exploration in 2017 was approximately 28.5 billion rubles. The natural resources Minister also noted that in 2018, expects less investment in exploration from the oil companies.

Investment growth in 2017, says Kozlov is connected with the necessity of additional exploration of existing fields and development of the Arctic shelf. On it in 2017 was made two major discoveries: the Central Olginskaya Deposit and Deposit on Asscom license area.

Potential additional production in Russia with a favorable scenario of development of the technology could exceed 150 million tons, the expert adds.

All slates will replace

Meanwhile, in the first place for investment in the development and production of oil remain an American company. According to preliminary estimates, consulting company Wood Mackenzie,

budgets for exploration and exploitation were to grow from American companies in 2017 60% to $15 billion.

The newspaper the Wall Street Journal back in January I wrote that investments in drilling made in 2017, will lead to increased production in the first months of 2018 for 6-9-month delay from the time drilling of the well prior to production.

However, the fruits of this work become visible at the beginning of the year according to the monthly report of the energy information administration of U.S. Department of energy (IEA), oil production in the U.S. in the first quarter of the current year to average of 10.24 million b/d. In 2017, the United States produced an average of 9.2 million b/d.

In its annual report World Energy Outlook 2017, the IEA also noted that traditional oil production will gradually decline around the world: in Russia by 2025, it could fall by 8% to 10.5 million barrels per day from 11.3 million in 2016,

Algeria and Venezuela will reduce production by about 0.25 million barrels per day each, will decrease the performance of Angola and Nigeria.

The growth the IEA expects mainly from the United States and Saudi Arabia. By 2025, oil production in the United States can reach 16.8 million barrels per day, Saudi Arabia 12.3 million barrels.

Meanwhile, in its February report by the International energy Agency (IEA) raised its forecast for demand for oil in the world this year by 100 thousand barrels — up to 99,2 million b/d. Thus, growth is expected to reach 1.4 million b/d versus the earlier forecast of 1.3 million b/d.

In the forecast, BP says that by 2040 Russia will provide 14% of the world production of oil and gas will remain the largest exporter of energy in the world.

Ekaterina Katkova


Tags: assessment , oil

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