When oil and gas companies looked for ways to cut back spending as lower commodity prices ate into profits, exploration budgets were among the first on the chopping block.
Now that market conditions are improving, conventional exploration is moving up the agenda as companies search for sources to help meet the world’s growing energy needs.
While some companies have chosen to focus exploration on less risky near-field and brownfield developments, others are venturing into underexplored areas. Some are spending top dollar on acreage in places with great potential while amassing positions in pursuit of discoveries.
Julie Wilson, research director of global exploration for Wood Mackenzie, recently shared insight on some of these conventional exploration trends and big wells to watch as 2018 unfolds. The themes included continued cautious spending on conventional exploration but a willingness to spend if the potential prize was great.
“Despite project emphasis on brownfield and near-field, explorers are actually going out and exploring in brand new frontiers,” Wilson said during this year’s Offshore Technology Conference (OTC) in Houston. “We’ve seen some really great discoveries in new frontiers over the past couple of years.”
More could be on the horizon. Wood Mackenzie featured 20 wells to watch this year during the OTC presentation. The list includes onshore, shelf and deepwater wells where drilling is either underway or planned across the globe.
But “exploration is a risky business. We don’t expect all of these wells to come in,” Wilson said. “We expect more than half of these will come in dry along the usual trend of a 40% success rate.”
Already some have been delayed or deemed dry holes, including Eni SpA’s Rabat Deep-1 and Kosmos Energy Ltd.’s Requin Tigre-1.
Rosneft and partner Eni’s Maria-1 in the Black Sea was also on the list. In March Rosneft said it finished drilling the exploration and appraisal well and discovered a “unique carbonate structure” that “constitutes a fractured reservoir that is highly likely to contain hydrocarbons.” But there was no mention in the news release of an oil and gas find, although Rosneft said the results gave it “confidence in the possibility to discover large oil and gas fields in the Russian Black Sea waters.”
Drilling of Statoil ASA’s Aru Trough has been pushed back to 2019, Wilson said.
Here are others on the list:
Energy demand continues to rise and there is still a pressing need for companies to step up exploration plans after the downturn prompted many to slow investment. Hopefully, today’s rising oil and gas prices will give companies the confidence they need to put more money into exploration.
Wood Mackenzie forecasts exploration spend in the top 134 basins will reach up to US$28 billion per year. Half of this is expected to be on deep water and ultradeep water.
Other themes to continue looking for this year, according to Wood Mackenzie, are: fewer explorers focused on fewer plays; suppressed investment; big wells mainly in deep water and frontiers; acreage reloading; and a move back to profitability.
Velda Addison can be reached at firstname.lastname@example.org.