From Mr George J. Gaspar.
Sir, Lex (“Oil well that ends well”, April 8) highlights the reserve replacement ratio. Inside the RRR is a point of much concern, namely the necessary offset to the production decline curve, or PDC as I would refer. As oil/gas drilling success moves forward, production declines require more drilling to stay even.
The cost of the RRR is critically important and more information should be revealed on the type of reserves generated on an annual basis for individual exploration and production operators, by purchase or actual exploration and production. A key point not addressed clearly is the cost of annual new exploration/development versus the value of current reserves.
Within the RRR, it should be made clear what comes from offshore oil development versus onshore. An analysis of the world reserve shift suggests offshore deepwater drilling emphasis is gaining momentum with resulting costs climbing. Also, the length of time to production is more extended as the worldwide oil/gas demand gains momentum passing through the current slower economic cycle. Higher demand growth will interface with production decline curves worldwide.
The oil/gas exploration challenge will remain considerable and reserves replacement requirement will grow.
George J. Gaspar, Mequon, WI, US
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