Texirsh

They assume 5-6% percent annual declines in existing fields. Yet newer production has much higher decline rates – ranging from 28% in the Permian to 13% in Brazil. XOM estimates the current decline rate to be closer to 15% without annual investments. This is a KEY point in projecting future oil supply needs.

Exxon has a high percentage of horizontal wells in tight formations so their decline will be higher. Most existing wells in the world are conventional, so a decline rate of 5-6% is reasonable.

With regard to their forecast, it may not be a political document but it is prepared by engineers who are subject to a subjective ranking system. After the initial estimates of future demand, it is reviewed by first line supervisors. The initial question is "are the assumptions inline with senior management viewpoints ". At that point the assumptions are massaged to match the employee incentive system and the report is passed upwards with similar ongoing questions.

Aussi who worked for XOM for 25 years and then as a consultant for another 5 years.

Berkshire Hathaway FAQ

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