Oil Prices Set to Increase Further

Simmons and other peak-oil theorists bring up valid points about rising recovery rates. One is that we really cant accurately assess the current state of production or recovery rates from most OPEC fields.

The EIA and other firms rely on third-party data providers for their information and as a basis for projections. That data is often vague and provides little real field-by-field production and reserves detail. In most cases, its also disseminated by the countries themselves, which have an interest in inflating their production capacity.
In addition, for non-OPEC countries, decline rates from existing fields have been faster than expected. In other words, production from mature fields is falling at a faster rate than most analysts had predicted. For example, in a recent conference call, oil services giant Schlumberger indicated that global decline rates are higher than most projections assume.

This has meant that non-OPEC production estimates have been consistently disappointing. Its difficult to assess if better technology and recovery rates can do more than simply offset some of the drop in production from natural decline.

Simmons also brought up data on the Yibal field in Oman. Shell, the main operator of the field, began using the most advanced horizontal drilling and production techniques in the 1990s. The result was a quick uptick in production, followed by a peak and precipitous decline in production starting in 1997. Simmons contends that technology didnt recover more oil from Yibal but just allowed the oil to be produced more quickly for a short period of time.

And then theres deepwater. Although Im convinced this is one of the only frontiers of oil production that will see growth in coming years, Simmons is certainly correct to bring up key risks to that outlook. Chief among those is that producers typically only drill a few appraisal wells in their deepwater fields; drilling such wells is extremely expensive in the deepwater. But with just a handful of wells to test a field, its hard to accurately gauge production potential, recovery factors or the size of the reserve.

IBTimes