Oil and gas discoveries dry up to lowest total for 60 years

Baku. 13 February. REPORT.AZ/ Discoveries of new oil and gasfields have dropped to a fresh 60-year low, as companies put a brake on exploration and large fields have become harder to find.

Report informs referring to Financial Times, there were only 174 oil and gas discoveries worldwide last year, compared to an average of 400-500 per year up until 2013, according to IHS Markit, the research group. The slowdown in exploration success shows that the world is likely to become increasingly reliant on “unconventional” resources such as US shale oil and gas to meet demand for energy in future decades. The typical time from discovery to production is five to seven years, so a shortfall in oil and gas discoveries now implies tighter supplies in the next decade. However, there are signs of a tentative upturn in conventional exploration this year, with some companies including Statoil of Norway planning to step up drilling activity. Discoveries hit a six-decade low in 2015, and then dropped again last year to about 8.2bn barrels equivalent of oil and gas. The slowdown reflects both the cyclical cuts in exploration made by companies struggling to stay afloat after the drop in oil and gas prices since 2014, and the structural shift in the industry towards onshore shale and similar reserves, especially in North America. Most frontier exploration is now offshore, where a single well can cost $150m, and the success rate for “wildcat” wells has been about one in five.

Spending on exploration fell from $100bn in 2014 to $40bn last year, according to Wood Mackenzie, another research company. Chevron of the US cut its exploration budget from $3bn in 2015 to $1bn per year in 2016-17, and ConocoPhillips is pulling out of deep water exploration altogether. A shale well onshore can cost $4m-$10m and be brought into production in weeks, as opposed to five or more years for deep-water discoveries.

Bob Fryklund of IHS Markit said: “We’re solving the problem through tight rocks.”Wells planned by ExxonMobil in Guyana, Eni in Italy, Statoil in the Barents Sea, and in Mauritania by Kosmos Energy and its new partner BP were among those with high potential for making a discovery.

Andrew Latham, head of global exploration research at Wood Mackenzie, said that lower daily rates for drilling rigs and other savings were allowing companies to achieve more for less money. “If you look at what they are spending, it looks very cautious.”He warned that, with exploration opportunities more plentiful than the available capital, there would be fierce competition for investment. “Countries that are overly harsh on their fiscal framework will not attract investment, because companies have choices.” The world’s two largest discoveries of the year were both in the US: Caelus Energy’s discovery at Smith Bay in shallow water off the north coast of Alaska, which could hold up to 4bn barrels of recoverable oil, and ConocoPhillips’ Willow discovery, which is also in Alaska but onshore, and is estimated to hold 300m barrels.