Oil and gas operators are in kind of a Catch-22 right now when it comes to exploration. On the one hand, statistics show that global demand will continue to grow and that fossil fuels will be expected to fill most of that demand in the foreseeable future. On the other hand, cash is a bit tight, and commodity prices remain stubbornly low. Being good future stewards can come at a heavy near-term cost.
With this dilemma in mind, Wood Mackenzie recently conducted its annual “Future of Exploration” survey. The company interviewed more than 200 senior industry leaders and professionals worldwide to obtain their views on the role of exploration vs. other growth options, the approaches that companies are taking and the challenges that need to be overcome.
Several key messages were uncovered this year:
- Conventional exploration and increased recovery from existing assets are the top resource capture options;
- Value creation remains the most important metric to demonstrate performance, followed by capital efficiency and return on investment;
- Most companies have increased their focus on lowcost opportunities so far this year, but national oil companies (NOCs) put more emphasis on growth and higher exploration impact;
- The short-term focus remains in mature basins for high-margin, low-cost and near-field prospects away from deepwater and frontier basins;
- Budget constraint is still the top issue, with opportunity availability and portfolio strength beginning to increase in importance; and
- Most think unconventional exploration needs further price support.
Respondents were asked to rate conventional exploration as a resource capture option compared to increased recovery, mergers and acquisitions (M&A), discovered resource access and unconventional exploration. While conventional exploration was by far the first choice for primary resource capture, increased recovery, M&A and discovered resource access rated highly as secondary and tertiary methods.
Tactics differ based on the size of the company. When asked how their exploration tactics have changed from 2016 to 2017, the majors, large-capital and mid-capital companies all noted a shift to low upfront cost opportunities, while NOCs shifted to high-impact opportunities, a focus on license extensions and renegotiation, and the opportunity to increase their exploration portfolio. Small-capital companies have mostly shifted their strategy to focus on their existing licenses.
Companies were ranked on several criteria, including a consistent track record and success rate; their appetite for risk and the ability to open new plays; their technical knowledge and ability; their portfolio strategy; their commitment to exploration; their focus on capabilities and key strengths; and their large-volume discoveries. Leading the pack was Eni, followed by Anadarko, Kosmos, ExxonMobil, Lundin, Tullow Oil, Shell, Statoil, Cairn and BP.
Contact the author at rduey@hartenergy.com.
Recommended Reading
Analyst Questions Kimmeridge’s Character, Ben Dell Responds
2024-05-02 - The analyst said that “they don’t seem to be particularly good actors.” Ben Dell, Kimmeridge Energy Partners managing partner, told Hart Energy that “our reputation is unparalleled.”
Tellurian Reports Driftwood LNG Progress Amid Low NatGas Production
2024-05-02 - Tellurian’s Driftwood LNG received an extension through 2029 with authorization from the Federal Energy Regulatory Commission and the U.S. Army Corps of Engineers.
Zeta Energy Appoints Michael Everett as COO
2024-05-02 - Prior to joining Zeta Energy, a lithium-sulfur battery developer, Michael Everett previously served as president and COO at Advanced Battery Concepts.
Shell Launches $3.5 Billion Share Buyback Program
2024-05-02 - Shell, which posted first-quarter adjusted earnings of $7.7 billion, will cancel all of the shares it buys.
Supply Disruptions Ahead as Canadian Rail Workers Vote for Strike
2024-05-01 - The union, representing more than 9,000 employees at Canadian National Railway and Canadian Pacific Kansas City, announced that 95% of its members approved of a strike, which could happen as early as May 22.