Astute energy industry observers have often noted that the preponderance of the world's oil reserves still lie in the Middle East. Occasionally, someone also reminds us that as much as 70% of our daily oil supply comes from fields that were discovered before 1970. Seldom, however, has anyone attempted to analyze the number of giant oil fields still left in the world, and their true nature. How old are they, how much oil do they produce, have they reached peak production-and most important-when are they likely to begin to decline, and how steeply? Not only have most of these questions gone unanswered, there is also little visible data available even to begin analyzing these key petroleum supply issues. After months of digging through statistics and with the help of knowledgeable experts, the majority of remaining "giant oil fields" can be identified. Some important questions arise from this work, including the need for far better transparency on the actual daily production rates from these fields, the need for some detail on which fields have now peaked, when the balance of all the massive old fields will probably peak and what the decline rates for this remarkably important pool of giant oil fields is likely to be during the next five to 10 years. One conclusion is inescapable: the world's most important energy source, oil, comes from a small population of giant fields. Too many of these critical fields are now very old. To think that most of these will still anchor the world's oil supply by 2010 could be naive. But, little data now exists to enable serious energy planners to answer all the questions this raises. Could the world suddenly awake to a nasty energy surprise? Some basics There are more than 4,000 active oil fields in the world, producing 68 million barrels a day from almost 1 million wells. Most of these fields are relatively small: the average field produces less than 20,000 barrels per day. Some 3% of these fields, totaling approximately 120, make up almost half of this output-their daily production each exceeds 100,000 barrels. Together, they produce more than 32 million barrels a day, or 47% of the world's total supply. Half of these 120 giants barely produce more than 100,000 barrels per day. The 62 smallest produce 12% of the world's daily oil supply; the 14 largest account for more than 20%. The average age of these 14 largest fields is 43.5 years. Thirty-six giant fields-all discovered more than 40 years ago-still produce close to a combined 16 million barrels a day. In contrast, 12 found in the past decade now yield less than a tenth of this amount, or 1.5 million barrels a day, which is 2% of the world's daily supply. The world clearly has a bifurcated oil supply in terms of both age of our important oil fields and the number of key fields propping up our production base. Around 20 other new giant fields are being developed but have yet to begin producing. Some are expected to exceed 100,000 barrels per day in output. However, no new field now being developed is projected to have daily production in excess of 250,000 barrels by 2005. In sharp contrast, the world's 19 largest "old, giant fields" still produce an average of more than 500,000 barrels per day, despite that they have been producing for nearly 70 years on average. Traditionally, the definition of a giant oil field has been one whose recoverable reserves exceed 1 billion barrels. Supergiants generally have reserves of more than 5- or even 10 billion barrels. This definition often gets ambiguous as the reserves for some fields are depicted as total possible reserves or oil in place, while other fields' reserves size adhere to the strict definition of proven and recoverable reserves. There is surprisingly little data on what most fields actually produce, including many of the world's giants. Virtually no analysis has been done on what the production rates of all the giant fields might be in the future: What are the current decline rates for these giant fields and what are they likely to become over time? Most of the world's true giant oil fields were found decades ago. In the past two decades, most oil and gas discoveries have been quite small. Occasionally a new billion-barrel oil field is announced, but even these giant finds tend to be tiny, in terms of daily production, compared with the giants found 50 years ago. The last four fields found with a productive capacity exceeding 1 million barrels a day are China's Daquing Field, which was discovered in 1959; Western Siberia's Samotlor, 1965; Alaska's Prudhoe Bay, 1968; and Mexico's Cantarell, 1976. Since then, no new field has come close to this 1-million-barrel-a-day production level. Only a few found since 1980 have produced more than 400,000 barrels per day, and many of these new giants are now very depleted. Of the more than 400 individually named oil fields that were discovered in the past decade, only 2.5% produce more than 100,000 barrels per day today and none produced more than 200,000 barrels a day. Only three discoveries in the 1980s still produce more than 200,000 barrels per day: Brazil's Marlim Field (530,000), Colombia's Cusiana/Cupiagua (300,000) and Norway's Draugen (215,000). Production from a few deepwater projects now being developed may peak at as much as 250,000 barrels per day. Two or three recent onshore Middle East discoveries may eventually produce up to 300,000 or 400,000 barrels per day by 2010 at the earliest. A field that can produce 100,000 barrels a day is not tiny but it represents only 0.13% of current world oil use, which is more than 75 million barrels each day. The world's total supply is far from diverse in terms of key oil fields. Instead, the world's core supply is still highly concentrated in a small number of fields-14 in six countries produce more than 20% of the world's total supply. The four largest of these fields provide 12%. When giants were giants Only three discoveries of the past 30 years still produce more than 500,000 barrels per day. The largest is Mexico's Cantarell; the second, Saudi Arabia's Shayba; the third, Brazil's Marlim. Those whose production exceeded 400,000 barrels per day belonged to the first generation of fields found in the North Sea. Most of these are now almost depleted. Only a few of these produce more than 100,000 barrels per day. Thirty years ago, the world's top 10 fields produced more than 10 million of the world's 50 million barrels per day. In 1970, Saudi Arabia's giant Ghawar, which still ranks as the world's largest oil field ever discovered, was producing more than 2 million barrels a day. This field peaked in 1990 at more than 6.5 million barrels per day. This astounding rate resulted in some damage to the reservoir and the field never again produced at such a rate. Its current production is estimated to be about 4.5 million barrels per day. The only other known field whose daily production ever exceeded 2 million barrels per day is Siberia's Samotlor, which peaked in the late 1980s at just above 3.5 million barrels per day. But this rate was attained through aggressive waterflooding while the field still had natural pressure as its primary drive. As a result, the field's reservoir was badly damaged. Today, it produces around 300,000 barrels per day. Aside from Ghawar, the nine other top producing fields in 1971 averaged almost 900,000 barrels per day: the highest at 1.096 million and the lowest, 740,000. Eight of the top 10 were in the Middle East. The others were in Venezuela. In 1971, the average age of these top 10 fields already was 31 years, and every one was still producing in 2001. When giants retire While public data are available for what many of the world's population of giant oil fields collectively produce, no information is public on the decline rates for any although it may be inferred from other information on Prudhoe Bay and the North Sea fields. Some industry observers argue that many giant fields might never decline, or that this occurrence is still decades away. However, there is little data to support this thesis, and the declines that can be observed in some giant fields make this thesis suspect. Virtually all serious petroleum scientists still believe that even the biggest giant fields will peak-it is only a matter of time. When these giant fields "roll over," they will all begin a long and steady production decline. History has shown that once giant fields peak, the decline can be quite rapid, even when many new development wells are drilled. Prudhoe Bay peaked in 1989, 12 years after it began producing. Since then, the number of wells in this world-class reservoir has almost tripled, and it is undergoing gas injections and other secondary recovery techniques to keep production as high as possible. Nevertheless, the decline rate at the wellhead averages about 20% and the net decline of the entire field is about half this, thanks to an exponential increase in the number of producing wells. In 2001, Prudhoe Bay production was estimated to be around 550,000 barrels per day; at its peak, it produced 1.5 million barrels per day. Each of the North Sea's largest giant fields-Ekofisk, Brent, Forties, Statfjord, Gullfaks, Heidrun and Oseberg-at some time had daily production exceeding 400,000 barrels per day. All have now peaked. Forties and Brent peaked in the early 1980s; today they struggle to produce a tenth of their peak rate. Three of Norway's biggest fields reached peak production only a handful of years ago and now produce only half of what they each did at peak rates. One of the few databases in the world to gather or estimate many of the world's major oil fields' production is that of IHS Energy Group. It was developed by its subsidiary, PetroConsultants, more than 50 years ago. Unfortunately, even some of the data on many key fields are now close to a decade old. This database is still possibly the world's best and most up-to-date depositary of field-by-field data. Admittedly, some of the world's giants have yet to peak. It is difficult to know how many fields in this category are either still at peak production or have yet to reach that level. But at some time they will all peak. Once declines begin, the volume of daily production lost will require an exponential number of new small fields to replace it. Since almost all smaller fields tend to peak fast and then decline at rapid rates, this creates a treadmill of new fields required that few energy analysts ever envisioned. This does not mean the world has "run out of oil." On the contrary, it highlights how resourceful the world has been in replacing giant fields with rapid and widespread exploration of far smaller fields. It also underscores the need to step up exploration activity throughout the hydrocarbon world. At the same time, we need to get a much better grasp on worldwide decline rates and what will likely be the future decline rate. OPEC's lack of data If it proved difficult to grasp the impact of field-by-field decline rates in the North Sea (though this basin has the best field-by-field production data in the world and the data are published monthly), it is impossible to analyze decline curves for virtually any OPEC field. With the exception of fields operated by non-national oil companies in Venezuela, Indonesia and Nigeria, the other OPEC producers stopped releasing field-by-field production data almost two decade ago. The most knowledgeable supply forecasters in the world can only guess the daily production for each OPEC country, or even for OPEC's largest fields. Few analysts even try. Few, if any, of the published guesses of the excess productive capacity for each individual OPEC country are derived from conducting field-by-field analysis. These estimates are educated guesses at best. More excess capacity assessments are based on sheer assumptions without any support from real production data. The fact that the world "flies so blind" should be disturbing to any serious energy analyst. That it is not primarily results from the general ignorance of the topic. Occasionally, production data on some of OPEC's giant fields slips into public domain because of major investment projects that involve Western firms. For instance, Iran is now embarked on a multibillion-dollar development of its offshore South Pars, reputed to be the largest gas field in the world. Several of the phases of this giant project involve producing gas to be piped onshore and then reinjected into some of its aging giant oil fields. Both the Agha Jari and Marun fields will get access to this gas reinjection. Published data estimates that the production from these two fields, both of which once produced nearly 1 million barrels a day, is now 100,000 to 200,000 barrels per day. This further confirms that giant Middle Eastern fields do finally peak and decline. The issue of what these giant OPEC fields now produce, when they peak, and how much they decline is of extreme importance for the world's economic well being, and this should not be left in such obscurity. It is in the best interests of each OPEC country to begin sharing this field-by-field data with knowledgeable outside experts. This would help educate the world's energy planners on the heavy capital costs most OPEC producers now face to keep their supplies in reliable shape. And, defusing the myth that OPEC oil is almost free would help prop up OPEC oil prices to levels necessary to keep the supply in good shape and provide enough excess cash to support the steadily rising social costs each OPEC country faces. M Matthew R. Simmons is chairman and president of Simmons & Co. International, a Houston-based investment-banking and energy- research firm. For his full report on this topic, contact the firm at 713-223-7852 or see the website, simmonsco-intl.com.