North Sea reserve appreciation, production, and depletion

Abstract

Oil field "growth" has become a well-recognized phenomenon in mature, well-explored provinces such as the United States leading to the continual under-estimation in oil production forecasts. This working paper explores the role of field growth, what is here called reserve appreciation, in newer oil-producing provinces, such as the North Sea, which have also generally exceeded earlier forecasts of production levels. The analysis seeks to determine the regularities in North Sea reserve appreciation as a function of the years produced, the size of the field, the time period, and whether location in the Norwegian or UK sector matters, using standard panel regression techniques. The analysis finds that the reserves in North Sea oil producing fields have appreciated at rates varying between 2% and 3% pr annum, with the notable exception of mid-sized oil reserves. In the end, about one-quarter of 1996 production from the North Sea can be attributed to reserve appreciation. This result indicates that, although reserve appreciation is important in the North Sea, new discoveries are the primary source of the greater than expected production from this oil producing province.