Global oil and gas decline rates accelerate, warns IEA report

The average rate at which oil and gas fields’ output declines over time has significantly accelerated globally, largely due to higher reliance on shale and deep offshore resources.

This means that companies must work much harder than before just to maintain production at today’s levels, according to a new International Energy Agency (IEA) report – The Implications of Oil and Gas Field Decline Rates. 

The IEA says the debate over the future of oil and natural gas tends to focus on the outlook for demand, with much less consideration given to how the supply picture could develop. 

Investment crunch for oil and gas sector

“This asymmetry is misplaced and a thorough understanding of the rate at which production from existing oil and gas fields declines over time is more important than ever.”

The Agency says the report seeks to rebalance this debate by drawing on its previous groundbreaking analysis on decline rates and exploring what has changed. 

The new analysis draws on production data from around 15, 000 oil and gas fields from around the world.

“Only a small portion of upstream oil and gas investment is used to meet increases in demand while nearly 90% of upstream investment annually is dedicated to offsetting losses of supply at existing fields,” said IEA Executive Director Fatih Birol. 

“Decline rates are the elephant in the room for any discussion of investment needs in oil and gas, and our new analysis shows that they have accelerated in recent years. In the case of oil, an absence of upstream investment would remove the equivalent of Brazil and Norway’s combined production each year from the global market balance. 

“The situation means that the industry has to run much faster just to stand still. And careful attention needs to be paid to the potential consequences for market balances, energy security and emissions.”

New resources needed for production to stay constant

Decline rates vary widely across field types and geographies. 

Onshore supergiant oil fields in the Middle East decline at less than 2% per year, while smaller offshore fields in Europe average more than 15% per year, according to the report. 

Tight oil and shale gas decline even more steeply: without investment, output falls by more than 35% over one year and a further 15% over a second year.

In 2010, a halt in upstream investment would have cut oil supply by just under four million barrels per day (mb/d) each year. Today the equivalent figure is 5.5 mb/d, while natural gas decline rates have risen from 180 billion cubic metres (bcm) per year to 270 bcm.

Against this backdrop, keeping global oil and gas production constant over time would require the development of new resources, says the IEA. 

Balancing supply vs demand

Even with continued spending on existing fields, the IEA’s analysis shows that more than 45 mbd of oil and nearly 2,000 bcm of gas from new conventional fields would be required by 2050 to maintain production at today’s levels. 

“This would be the equivalent of adding the total oil and gas production from all of the top three producers combined. The amounts could be reduced if oil and gas demand were to come down.”

The report also highlights that it has taken almost 20 years on average to move from issuing an exploration licence for oil and gas until first production, including nearly a decade to discover new fields and a further decade for appraisal, approval and construction.

It also highlights that decline rates – the annual rate at which production declines from an existing oil or gas field – underpin our analysis of market balances and investment needs across all outlook scenarios.

“Nearly 90% of annual upstream oil and gas investment since 2019 has been dedicated to offsetting production declines rather than to meet demand growth. Investment in 2025 is set to be around $570 billion, and if this persists, modest production growth could continue in the future. 

“But a relatively small drop in upstream investment can mean the difference between oil and gas supply growth and static production. At the same time, less investment is required in a scenario in which demand contracts.”

Shale gas revolution

The IEA report notes that the composition of oil and gas production has changed rapidly in recent years with the notable rise of tight oil and shale gas. 

“In 2000, conventional oil fields contributed 97% of total oil output globally, however, by 2024 this share had fallen to 77% as a result of rising output from unconventional fields. In the case of natural gas, around 70% of the 4,300 billion cubic metres (bcm) produced today is from conventional fields, with nearly all of the rest being shale gas produced in the United States.”

Even with the shale revolution, overall oil and gas output still relies heavily on a small number of supergiant fields, largely in the Middle East, Eurasia and North America, which together accounted for almost half of global oil and gas production in 2024, the report says.

Cover photo:  qiujusongmoovstock