Oil and gas production is like running uphill on a treadmill with a merciless trainer who keeps cranking up the speed. It demands continuous investment just to maintain production and to meet even flat, let alone growing, demand. A new study highlights accelerating decline rates – and what they mean for oil companies, geopolitics and the climate.
The International Energy Agency (IEA)’s report indicates that, in the absence of new investment, oil production would fall by about 8 per cent per year and natural gas by about 9 per cent. This is up substantially from the 2010 levels, because of a much higher share of shale production – mostly from the US – and deepwater output. These decline more quickly than the onshore super-giant fields typical of the Middle East.
Even with new investment, natural decline rates are 5.6 per cent for conventional oilfields and 6.8 per cent for conventional gas. Effectively, each year, Iraq plus Oman disappears from global oil supply and Qatar plus Algeria disappear from global gas. This is despite strenuous efforts to sustain output from existing fields, including drilling new wells and injecting water, gas and other substances. These losses have to be replaced through developing new fields.
This does not mean that demand will necessarily increase. Oil consumption, in particular, may be close to a peak as electric vehicles become ever more capable and popular. But it is unlikely that global oil needs will decline by anything close to 5.6 per cent annually. Even a fairly rapid reduction of 1 or 2 per cent annually would require significant continuing upstream investment.
Yet in 2021, the IEA’s net-zero report seemed to say the opposite: that no investment was required in new oil and gasfields. Not surprisingly, environmentalists seized on this, and it has been used as a justification for demanding that oil companies wind down production and for governments not to approve new field developments.
The puzzlement over the IEA’s apparently conflicting messages stems from confusing what should be, for the sake of the climate, with what is.
If we were really on track for a net-zero carbon world, or even a sustained decrease in hydrocarbon demand, there would be no need for bans on new fields. Oil and gas prices would be plummeting, and investment would be drying up.
Instead, oil prices today are modestly below the historic average while gas prices are still well above it. Upstream investment has been relatively low after the oil price crash of late 2014, but has still remained fairly steady at about $600 billion annually, excluding the Covid-hit years of 2020 and 2021. Nine-tenths of this spending goes to replace declines, while only a tenth increases supply.
Oil companies are very active in deepwater hotspots such as the US Gulf of Mexico, Brazil, Guyana and West Africa. Opec members Iraq and Libya are attracting major new spending after periods of political turmoil.
Environmental groups will doggedly fight new hydrocarbon production projects such as drilling in Alaska, developing the Rosebank and Jackdaw fields off the UK coast, or building a pipeline for oil from landlocked Uganda.
This is ineffective and counterproductive.
For a start, the distinction between new and existing fields is largely meaningless. Production can be boosted from existing fields by “enhanced recovery” methods or by exploiting additional reservoir layers or field extensions. From both climate and economic perspectives, new fields may be cheaper to produce from and lower in emissions than wringing the last drops from older fields, or extracting carbon-intensive resources such as Canada’s gigantic oil-sands.
If new fields in developed countries are blocked off, oil and gas will be imported from Russia or the Middle East or an overtly anti-climate US. With no new investment, Opec and Russia would collectively produce more than 65 per cent of global oil by 2050. That would be a politically unacceptable level of dependence for their key customers.
Far-right parties across Europe, such as the UK’s Reform, are using worries about high energy bills and opposition to “net-zero” carbon policies and bans on North Sea fields to boost support. They do not have to present any positive or practical energy or climate vision of their own.
Alternatively, investment in new producing countries could be banned. Financing for new fields from western banks or international financial institutions has been very hard to obtain for years. That policy bars new entrants, mostly lower-income countries such as Uganda, Mauritania and Guyana, while ensuring continuing hydrocarbon revenue flows to wealthy countries such as the GCC states, Australia, Norway and Canada.
If oil-producing countries themselves decided voluntarily to cease investment, the rapid loss of oil production would send prices through the roof. Something similar occurred in 2022, when Russia restricted gas supplies to Europe during its invasion of Ukraine. In the face of economic crisis, European politicians seized the chance to strengthen support for low-carbon energy and improve efficiency. But they also introduced price caps, restarted coal power stations, and flew to the Gulf and North Africa to beg for additional oil and gas.
The major producers in the Middle East have to invest steadily to meet their assessment of demand, not overproducing to crash prices, nor underspending and damaging the global economy. They learnt the bitter lesson of restricting supply too much in the 1970s, which was followed by a surge of competition elsewhere and a collapse in demand for their oil, leading to a decade and a half of slump. They should probably err – but only a little – on the side of over-investing.
Their giant, low-cost, low-carbon footprint resources mean they will inevitably gain market share both for oil and gas as long as they maintain consistent investment plans. Qatar and Saudi Arabia in gas, Iraq in oil, and the UAE in both, all have such programmes. The tyranny of the treadmill applies to them as much as to any hydrocarbon producer, but their superior fitness should make them the winners.
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New Zealand 153 and 56 for 1 in 22.4 overs at close
Pakistan 227
(Babar 62, Asad 43, Boult 4-54, De Grandhomme 2-30, Patel 2-64)
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1 Jeff Bezos $140 billion
2 Bill Gates $98.3 billion
3 Bernard Arnault $83.1 billion
4 Warren Buffett $83 billion
5 Amancio Ortega $67.9 billion
6 Mark Zuckerberg $67.3 billion
7 Larry Page $56.8 billion
8 Larry Ellison $56.1 billion
9 Sergey Brin $55.2 billion
10 Carlos Slim $55.2 billion
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CAF Champions League semi-finals first-leg fixtures
Tuesday:
Primeiro Agosto (ANG) v Esperance (TUN) (8pm UAE)
Al Ahly (EGY) v Entente Setif (ALG) (11PM)
Second legs:
October 23
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Find the right policy for you
Don’t wait until the week you fly to sign up for insurance – get it when you book your trip. Insurance covers you for cancellation and anything else that can go wrong before you leave.
Some insurers, such as World Nomads, allow you to book once you are travelling – but, as Mr Mohammed found out, pre-existing medical conditions are not covered.
Check your credit card before booking insurance to see if you have any travel insurance as a benefit – most UAE banks, such as Emirates NBD, First Abu Dhabi Bank and Abu Dhabi Islamic Bank, have cards that throw in insurance as part of their package. But read the fine print – they may only cover emergencies while you’re travelling, not cancellation before a trip.
Pre-existing medical conditions such as a heart condition, diabetes, epilepsy and even asthma may not be included as standard. Again, check the terms, exclusions and limitations of any insurance carefully.
If you want trip cancellation or curtailment, baggage loss or delay covered, you may need a higher-grade plan, says Ambareen Musa of Souqalmal.com. Decide how much coverage you need for emergency medical expenses or personal liability. Premium insurance packages give up to $1 million (Dh3.7m) in each category, Ms Musa adds.
Don’t wait for days to call your insurer if you need to make a claim. You may be required to notify them within 72 hours. Gather together all receipts, emails and reports to prove that you paid for something, that you didn’t use it and that you did not get reimbursed.
Finally, consider optional extras you may need, says Sarah Pickford of Travel Counsellors, such as a winter sports holiday. Also ensure all individuals can travel independently on that cover, she adds. And remember: “Cheap isn’t necessarily best.”
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How the UAE gratuity payment is calculated now
Employees leaving an organisation are entitled to an end-of-service gratuity after completing at least one year of service.
The tenure is calculated on the number of days worked and does not include lengthy leave periods, such as a sabbatical. If you have worked for a company between one and five years, you are paid 21 days of pay based on your final basic salary. After five years, however, you are entitled to 30 days of pay. The total lump sum you receive is based on the duration of your employment.
1. For those who have worked between one and five years, on a basic salary of Dh10,000 (calculation based on 30 days):
a. Dh10,000 ÷ 30 = Dh333.33. Your daily wage is Dh333.33
b. Dh333.33 x 21 = Dh7,000. So 21 days salary equates to Dh7,000 in gratuity entitlement for each year of service. Multiply this figure for every year of service up to five years.
2. For those who have worked more than five years
c. 333.33 x 30 = Dh10,000. So 30 days’ salary is Dh10,000 in gratuity entitlement for each year of service.
Note: The maximum figure cannot exceed two years total salary figure.
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- 1. Lilian Calmejane (France / Direct Energie) 11
- 2. Fabio Aru (Italy / Astana) 10
- 3. Daniel Martin (Ireland / Quick-Step) 8
- 4. Robert Gesink (Netherlands / LottoNL) 8
- 5. Warren Barguil (France / Sunweb) 7
- 6. Chris Froome (Britain / Team Sky) 6
- 7. Guillaume Martin (France / Wanty) 6
- 8. Jan Bakelants (Belgium / AG2R) 5
- 9. Serge Pauwels (Belgium / Dimension Data) 5
- 10. Richie Porte (Australia / BMC Racing) 4
Brief scores:
Manchester City 3
Aguero 1', 44', 61'
Arsenal 1
Koscielny 11'
Man of the match: Sergio Aguero (Manchester City)
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Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
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Champions Legaue final: June 1, Madrid
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Investment raised: $4 million
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