PowerSwitch

http://www.ft.com/cms/s/2c6bc00c-bb17-1 ... e2340.html

Oil and gas production in the North Sea is now expected to be about 10 per cent lower over the next few years than previously thought, according to the leading survey of the state of the industry.

and

At the beginning of the month Alistair Darling, the trade and industry secretary, declared that 2006 was the best year for new finds of oil and gas for five years. There is still an estimated 16bn-25bn barrels of oil equivalent in oil and gas left to be extracted.

As we can't directly measure oil volumes in the rocks the estimated reserves are inferred quantities from other measurements. Statistics are routinely used to help quantify the probability that an oilfield will ultimately produce a given quantity of oil. Thus we talk of P50 reserves having a 50% probability of being there; P10 reserves of having a 10% probability of being there, etc. As an industry we are very conservative and before we commit to spending often hundreds of millions of pounds to develop an oilfield, the P90 reserves have to at least breakeven or make a profit, i.e. at least a 90% probability of being there. This still means that there is a 10% probability that the oil field will not produce what we think. This financial risk is a risk that is unique to the oil industry. No other industry takes the commercial risks that the oil industry does.
So although the price of oil has risen in recent years, our costs have also risen dramatically. Oilfields that were uneconomic to develop at a low oil price, in some cases are still uneconomic to develop.

This is the analysis Euan Mearns at TOD did a while back:

The architecture of UK offshore oil production in relation to future production models



More here: The forecasting record of CERA and other commentators

... but a govt speaker on BBC radio this morning was saying we had 20-25 years more oil in the North Sea.

The oil tank containing the projected monthly output of North Sea oil in 2020

No, he was basing it on just supplying Milton Keynes again

Vortex wrote:Oil and gas production in the North Sea is now expected to be about 10 per cent lower over the next few years than previously thought, according to the leading survey of the state of the industry.

Is this simple or compound?

If this means that production is going to fall by 15% p.a. instead of 5% for example, this would be very bad news.