Australian oil output may be basking in a three-year boom but shrinking fields, tougher geology and speedy development technology will force projects to peak quicker and decline faster than expected.
A flush of new fields will make Australia the biggest contributor to Asia-Pacific's production growth for a second year running, giving regional refiners - who import about two-thirds of their crude from outside of Asia - new options.
Those gains may be fleeting if recent developments are any guide, analysts and exporters say, making it tricky for buyers to plan future supplies as oilfields in Asia Pacific's fifth-largest producer ramp up fast but taper off just as quickly.
For instance, output from the Mutineer-Exeter oilfield, off Western Australia, has nearly halved since it came onstream 11 months ago, surprising traders who had counted on a more sustained and prolonged source of supply.
"The most recent developments in Australia - Enfield and Mutineer-Exeter - have been developed using Floating Production, Storage and Offloading (FPSO) systems," says Richard Quin, lead Australia analyst for upstream consultancy Wood Mackenzie. "This type of offshore development is capital-intensive and therefore the operator will try to recover the oil quickly in order to recover costs."
The trend is reinforced by the shrinking size of oilfields in Australia, considered a mature province where output will soon peak, as well as the more costly and sophisticated technology required to exploit difficult or complex reservoirs that have been made economical by oil's three-year price boom.
The average size of a commercial oil discovery in Australia has been 23 million barrels over the past 10 years, one-quarter of the worldwide average, Wood Mackenzie estimates in its Global Oil and Gas Risks and Reward Analysis from 1994 to 2003.
The decline mirrors the unexpectedly fast depletion rates in areas such as the North Sea but is in contrast to most other major new oilfields in places like West Africa, where six-digit output rates are typically maintained for a decade or longer.
The Australian Bureau of Agricultural and Resource Economics (ABARE) estimates that output could peak at around 557,000 barrels per day (bpd) in 2007-2008 as new fields come onstream. But Australian production of crude oil and condensate, an ultra light form of oil, will fall back to to 500,000 bpd in 2010-2011 as fields mature.