Summary Chevron announced that it is dropping a program to develop more oil from aging Cook Inlet. The production workforce will be reduced by 10 percent. A statement issued by the company cited "difficult economic conditions." The company will continue to operate some platforms. Chevron said the Cook Island business would contract because of production declines, high lifting costs, financial issues and volcanic activity. Total oil production from the region is 8,500 bbl/day. Analysis Cook Inlet was an active exploration region in the late 1950s through the mid-1960s. In all, 13 small natural gas fields and 6 oil fields were discovered by Chevron (then Standard Oil Company of California) and others. By the early 1990s, four of the oil fields had cumulative production in excess of 100 million barrels. Altogether, the fields have produced over 1 billion barrels. But the fields have been on steady decline and today, remaining reserves for all fields are about 100 million. Lifting costs continue to go up and the offshore installations in the inlet are steadily deteriorating because of corrosion. Of the total 8,500 bbl/day of production, 2,900 bbl/day is produced by XTO Energy. Thus Chevron's share is tiny compared to other producing regions. A further negative is volcanic activity in the area. Chevron is better off to take what little profit that they can and then as the economic limits are reached, abandon the wells and demolish the platforms. This scene is being repeated all over the U.S.A. as oil companies take critical stock of their producing properties. Those near the end of their lives will be abandoned. A similar situation exists in the North Sea. Oil companies have greatly reduced exploration activity and reduced production operations to those few that still generate oil company. Even crude oil selling for $80/bbl is not enough to halt the erosion of North Sea economics. Beyond the North Sea, operators all over he world are culling out properties that are near the ends of their productive lives. It is difficult to estimate exactly how much production will be lost as a consequence of these curtailments and abandonments but it is likely in the hundreds of thousands of daily barrels on a worldwide basis. This is another component in the supply/demand equation and helps to explain why crude oil prices are holding steady in a worldwide economic environment that is improving only marginally.

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