Insight

Non-OPEC decline rates: lower for longer

31 August 2017

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31 August 2017

Non-OPEC decline rates: lower for longer

Report summary

Decline rates are a critical factor influencing the oil market and price recovery. Investment cuts at producing fields and a reduced pipeline of new projects since the price crash should have caused non-OPEC decline rates to increase. From historical lows in 2014, decline rates jumped to 5% in 2015. But our analysis suggests they will stay at this level until 2020. In the short term, operators have implemented self-help measures aimed at maximising cash flow. Longer term, projects launched during the period of high investment will mitigate declines over the 2018 to 2020 period. But these drivers will wane beyond 2020 as the effects of the lack of investment are felt. Higher prices will be needed to stimulate investment in new conventional production. We analyse the potential effect on a widening supply gap from different decline rate trends. Stable decline rates are a disappointing story for those looking for significant price support coming from declining conventional production.

Executive summary
Introduction
- After reaching record highs, investment in producing fields has now halved
Why global declines will remain stable until 2020
- Two short-term factors have stabilised declines at 5%
- Longer-term factors will hold decline rates below historical norms
- Differences in regional decline rate trends reflect the wide range of drivers at play
- Onshore declines are far less severe
- Without increasing investment, non-OPEC declines will accelerate after 2020
Changing global decline rates: potential impact on the oil market
Conclusion
Appendix
- Methodology
- OPEC decline rates

Tables and charts

This report includes 15 images and tables including:

Annual average non-OPEC decline rate (excluding North America tight oil)
Supply gap by 2021, minus 1% change in non-OPEC declines...
...And plus 1% increase in declines

New sources of supply that close the 2021 supply gap under our base case forecast
Non-OPEC capex on producing oil fields (excluding North America tight oil) and Brent oil price
Canada oil sands production profile
Oil sands effect on the global decline rate
Proportion of production by asset vintage
Asset vintage decline rates
Production from European projects onstream since 2011
Effect on European decline rates
Average non-OPEC decline rates: the biggest producing regions have the lowest declines
Proportion of production by resource theme
Resource theme decline rates
Annual average OPEC decline rates