World Energy Outlook 2006

The prospects for investment and production-capacity additions beyond the
present decade are more challenging and will require further increases in
investment. Increased exploration investment is required to appraise reserves for
the next wave of development projects. The future projects in the “golden
triangle” of deep-water basins, encompassing the Gulf of Mexico, Nigeria and
Angola, are likely to be more numerous but smaller. Such fields will have higher
development costs per barrel, requiring higher investment than current large
projects, which benefit from economies of scale. Existing drilling rigs and
90 others under construction are expected to be kept busy well into the next
decade, as exploration activity and the number of development projects increase.
On the other hand, there are a number of new large unexplored basins, notably
in the Russian Arctic, deep-water Caspian and offshore Greenland, that could
yield significant new discoveries and underpin a new wave of large-scale
developments. The harsh climate and the lack of existing infrastructure will
mean higher capital investment and, assuming successful exploration and
appraisal, production of oil or gas in these areas is unlikely to start much before
2020, given their remoteness.
In the Middle East, Iraq is under-explored, but security would have to improve
greatly to permit the large-scale involvement of international companies. Even
when the safety of company personnel can be assured, investment is likely to be
focused initially on the re-development of existing fields, rather than exploration
and the development of new fields. The international oil and gas companies are
uniquely equipped to undertake complex, large-scale projects, thanks to their
project-management skills, their access to advanced technology and their
financial resources. But opportunities for them to invest remain limited because
of government policy, civil conflict or geopolitical risks – especially in the Middle
East, Russia, Africa and South America. The willingness and ability of national
oil companies to develop reserves are in many cases very uncertain. 9
Combating production decline at existing fields remains a top priority for the
industry. Production from some of the super-giant oilfields that have been in
production for decades, including Ghawar, the world’s largest field, will plateau
within the next decade or so. Increasingly large investments in enhanced oil
recovery will be needed here, as elsewhere in mature basins, raising production
costs. Fields developed more recently using advanced technology to maximise
output and recovery are expected to remain at plateau for shorter periods and
then decline more rapidly than earlier fields.
9. See Chapter 3 for a discussion of the main uncertainties surrounding oil investment in the longer
term, including the Deferred Investment Case in OPEC countries.
342 World Energy Outlook 2006 - FOCUS ON KEY TOPICS
© OECD/IEA, 2007