The Global Average Decline Rate measures the average rate of production decline from oil fields currently in production.

It has been estimated that the Global Average Decline Rate (GADR) is at least 6.7% per annum. ¹

What this means is that every year the global oil industry must bring on stream an incremental 5.7 million barrels per day of new production just to compensate for declining fields (6.7% of 85m b/d). If less than 5.7 million b/d is commissioned, then global oil production will fall (and we will enter a ‘post Peak’ world).

Let’s consider this in more detail.

There are 98 oil producing countries in the world.

Of the 98 producing nations, 67 of them (or 68%) are in documented decline i.e. national oil production has peaked and is now in terminal decline. That leaves 31 nations that have flat or have rising oil production.

Of the 31 producers, 10 can be disregarded simply because they are incapable of raising their current production levels by more than 100/- b/d (Surinam, Bolivia, Chad, Lithuania, Mongolia, Bangladesh, Philipines, Brunei, Guatemala and Belize).

That leaves 21 countries remaining with the potential to raise production in any meaningful way.

What of the remaining 21?

There are 8 countries within this group which have the potential to raise national oil production in the future by between 100/- and 300/- b/d (Equador, Congo, Equatorial Guinea, Sudan, India, Vietnam, Thailand and Malaysia). Together, these 8 countries have the potential to add 1.3m b/d of oil production. Whilst helpful, 1.3m b/d would contribute less than 4 months of incremental production growth towards countering the GADR.

So it appears that the weight of global demand growth falls on the shoulders of only 12 countries (China is ignored since it is already a net importer of oil and has been for a number of years).

Yet this only tells half the story.

Remember, not only is the global oil industry expected to find sufficient incremental production to counter the GADR every year, but it must also add sufficient supplies to address rising incremental demand estimated at 1-2% pa (or 0.9-1.8m b/d). See the chapter titled - ‘The Demand for Oil’.

Where is this 4.8m – 5.7m b/d of addition annualized oil production supposed to come from? 

Sources

1 - International Energy Agency, WEO Report, November 2008

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