Output from the world’s oilfields is declining faster than previously thought, the first authoritative public study of the biggest fields shows.
Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.
The findings suggest the world will struggle to produce enough oil to make up for steep declines in existing fields, such as those in the North Sea, Russia and Alaska, and meet long-term demand. The effort will become even more acute as prices fall and investment decisions are delayed.
The decline will not necessarily be felt in the next few years because demand is slowing down, but with the expected slowdown in investment the eventual effect will be magnified, oil executives say.
“The future rate of decline in output from producing oilfields as they mature is the single most important determinant of the amount of new capacity that will need to be built globally to meet demand,” the IEA says.
The watchdog warned that the world needed to make a “significant increase in future investments just to maintain the current level of production”.
Assuming supply destruction is greater than demand destruction, buying some oil futures is starting to look like a pretty good bet at some point soon.