happycajun

Oil and Gas Producers Spending Enough to Grow Production Through 2010

Hey! If you are talking about the handful of pinksheet listed E&P's that you mention having access to enough capital to "grow production through 2010" that is one thing.... for the whole E&P sector to "grow production through 2010" is a whole 'nother fantasy! Just ain't happening. Regarding "decline rates kicking in," I'm not sure what Mr. Daunheimer is implying, but the basic depletion mechanics of a well are complex and depend a large number of factors, with drive and lift mechanisms being two principal issues in an oil well. Most oil wells will be most productive in their first year of operation, and the rate of production commences to decline at an exponential rate. Thus, the rate of production will drop more in the first year than in the second - etc... Again, this depends on drive and lift, but in general, it is how oil wells age. Thus, "decline rates" kick in most significantly at the beginning of a well's life - if there is no cap-ex, then there will be decline, and it will be more significant in the early life of a field.

Many old fields that were super giants in their day continue to produce at MUCH lower rates for years after their prime days. I remember when we shut in the Dammam #7, I think it was in 1982, in Saudi. The #7 was the first successful commercial well in Saudi, drilled in 1938 and produced pretty much continuously for 45years. The Dammam field was shut in because it only produced about 30,000 barrels per day, and with a crude glut, the old GOSP and related facilities needed more capital improvement than the marginal production would justify!