According to quarterly reports, average daily production of crude oil and natural gas liquids from eight major oil firms dropped by some 304,000 barrels per day (-2.8%) during the first quarter of 2005 as compared to the prior year.
Combined liquids production for these firms dropped to 10.475 million barrels per day (mbpd) in 1Q 2005 from 10.779 mbpd in 1Q 2004.
The firms include ExxonMobil, BP, Royal Dutch Shell, Chevron Texaco, ConocoPhillips, Amerada Hess, Unocal and Marathon. Results from the mega major international companies such as Total and Eni, or the state-owned firms such as PEMEX and PDV are not yet released.
Royal Dutch Shell experienced the largest actual drop—184 thousand bpd. Separately, the company faces losing 10% of its oil and gas acreage in Oman, its biggest source of oil in the Middle East, as the government considers bringing in other companies to revive production. (Bloomberg).
To offset these declines, these firms are angling for more access to reserves held by national oil companies (NOCs)—to work together with the state owners to develop more completely the oil in place.
At an oil industry conference last week, Jeroen van der Veer, CEO of the Royal Dutch/Shell Group and President of Royal Dutch Petroleum Company, remarked:
We currently use 200 million barrels of oil equivalent [BOE= barrels of crude plus natural gas counted by the equivalent amount of energy contained in a barrel of oil] a day to meet the world’s energy needs and of these 80 per cent are hydrocarbons. By 2050 we are likely to use 400 million barrels of oil equivalent a day of which 60 per cent will be hydrocarbons—that means we are going to see a very substantial increase in the use of oil and gas over the next half century.
And contrary to what some commentators say there is plenty of oil and gas left. It might not be in traditional locations, it might take unconventional forms, and it might be mined rather than drilled but there is plenty left. The costs of recovering these fuels has more than halved in the last decade and in an era of high prices they are now looking even more economic.
The IEA predict unconventional resources such as oil sands and oil shale could make up 8 per cent of global oil supply by 2030 at 10.1 million barrels a day. And there is similar scope to develop unconventional gas reserves such as coal bed methane.
In this last quarter, Shell produced 78,000 barrels per day of oil from oil sands—down from 82,000 (-5%) from the first quarter in 2004. The company also has maintained its development work on extracting oil from oil shale.
Increasingly, the companies will need to look in all the hard places for their supplies. Not that it is hurting the bottom line—revenues and profits were up again this quarter. But with peak production of the “easy” crude (relative term—some of the drilling efforts are technically amazing) approaching, you can count on rising oil and gas prices as a constant.