together, comprise the world’s oil resource.
Each individual oil well, due to immense pressure, typically hits a maximum shortly after it is drilled and starts producing. Depending on the type of well and the quality of the field, its production profile usually follows an exponential decline curve. Eventually, production levels off at a much lower level of a few barrels a day or a week. Sometimes this goes on for a very long time. These old wells, which are still oozing a bit of oil, are called “stripper wells.” You can tell the age of an oil field at a glance: if it’s full of tall drilling rigs, it’s new; if it’s full of the iconic stripper -well pump jacks going up and down, it’s old and tired. Some oil wells in the US have been producing for over 100 years, but at a tiny fraction of what gushed out of them during their glory days. It’s even worse for the low -grade oil. For example, in the Bakken region in North Dakota, new wells are drilled into shale rock, in search of shale oil. Shale, as a resource, is very close to the “bottom of the barrel” in terms of resource quality. The oil is suffused through rock strata like butter through a filo dough pastry. It doesn’t just come gushing out of the ground. Rather, it takes a lot of energy to flush it out using fracking fluid , which consists of compressed water, sand, and a secret cocktail of toxic chemicals. As seen in the above left graph above, this sort of tight oil formation depletes very rapidly: after six months the production rate typically falls by half, and after three years they are down to just 10 to 15 percent of the initial flow rates. 169 By adding up all the wells in a field or a region that have already been drilled, it is possible to estimate the field’s or the region’s ultimate recoverable quantity of oil by looking at its overall decline rate . It is possible to compensate for depletion in older wells by drilling new ones. While a higher rate of drilling reduces the decline rate, it doesn’t create any new oil underground, adding straws just sucks up the dregs faster. The graph on the right above shows the twin peaks of production in the North Sea oil region, which is shared by the UK and Norway. Early on, the oil flowed so fast that just a few fields needed to be drilled to continue growing the production volumes. As usual, the largest, easiest, and cheapest discoveries are exploited first. After production peaked in 1984, a great many wells had to be drilled into smaller fields, just to keep production volumes from collapsing. But by 1999, even deploying hundreds of oil platforms to the North Sea wasn’t enough to overcome the underlying decline rate, and the region entered terminal decline. Consequentially, the public finances of the once oil-rich UK went into decline as well. The UK went from a low-priced oil exporter to a high-priced oil importer — its prize for pumping out its oil and selling it as quickly as possible. This is a classic example of “time bias.”
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