Experts predict companies seeking hydrocarbon pay will turn places on every continent into exploration hotspots of varying degrees in 2014.

Massive gas finds off the east coast of Africa are expected to keep companies busy with possible movement farther north in hopes of hitting more gas, according to Foster Mellen, an oil and gas strategic analyst with Ernst and Young. Those willing to jump political hurdles in their search for oil and gas could transform areas offshore Cyprus into a hotspot.

Moving across the Atlantic to North America, eagerness on the part of the Mexican government to reverse years of declining production could spark a frenzy of activity in the deepwater Gulf of Mexico (GoM). Farther south, eyes are on South America’s Transform Margin, and the excitement is expected to continue offshore Brazil, where Mellen believes onshore shale play activity could blossom toward the end of the year.

High interest in Norway’s licensing rounds already has set the scene for what Tom Ziegler, vice president of GlobalMultiClient at Petroleum Geo-Services (PGS), said is an area to watch in 2014. Acreage offshore Russia, particularly in the Barents and Pechora seas, also could attract oil companies.

Looking to Asia, Myanmar is poised to be a hotbed of activity in 2014, as nearly 60 companies already have been shortlisted for participation in a bidding round that makes available onshore and offshore blocks. However, companies are not expected to overlook Indonesia nor to give up on Australia – both could be exploration hubs in 2014.

These are just a few of the many areas mentioned as possible future hotspots.

So where are the most promising emerging exploration frontiers for 2014? “It’s worldwide,” Ziegler said. “Offshore remains key to delivering on the demand for hydrocarbon liquids despite the increasing volumes from shale. Shale is part of the mix, but it still remains a small part of the mix.”

East Africa, Middle East

With recent successes offshore, East Africa is certainly an area that is going to be busier in the next year or so; exploration campaigns are being committed, and interest is rising from the independents and, more recently, the majors, Ziegler said. Anadarko and its partners, for example, have made several natural gas discoveries offshore Mozambique. Within the Offshore Area 1 block alone, Anadarko said on its website that it has drilled more than a dozen deepwater wells, finding an estimated 1 Tcm to 2 Tcm (35 Tcf to 65 Tcf) of recoverable gas.

Yet the region is still very underexplored, with few wells drilled to date, specifically offshore Mozambique and Tanzania and onshore Kenya and Uganda, Ziegler added. But that could change. Analyst Wood Mackenzie forecast that upstream investment in East Africa could hit US $7 billion by 2018.

Mellen called offshore East Africa an area that has been hot and will stay red hot. “Depending on whom you talk to, we have only started scratching the surface there,” Mellen said. “Yet we’ve found massive gas deposits there. Onshore and farther up the coast, we are starting more exploration and with mixed results. But they’ve found some good potential plays in Uganda, Kenya, even up in Somalia and Ethiopia. We expect activity in that part of eastern Africa to remain relatively hot.”

Shifting northward, gas finds offshore Israel – the site of Noble Energy’s massive Tamar and Leviathan finds – are likely to give companies hope that similar gas plays can be replicated off the coast of Cyprus, Mellen said.
Noble’s appraisal well on its Block 12 gas discovery offshore Cyprus has firmed up gross resources of up to 170 Bcm (6 Tcf), Hart Energy’s Deepwater International reported in October. “The substantial field size is enough to encourage Noble and its partners to continue with their evaluation of various phased development options, including an initial onshore LNG plant, although it would be marginal to develop on a standalone basis at present,” the newsletter noted.

Noble’s gas discoveries here have attracted others to the area, including offshore Lebanon. “There was a big milestone in May this year when the minister of energy announced the opening of a round – Lebanon’s first step toward exploration offshore,” Ziegler said. “Cyprus had a licensing round this year, so I haven’t included it as an exploration hotspot for next year. But in Lebanon, we believe the license round will likely close in the first half of 2014 with block awards coming after that. There is certainly extreme interest in the area. We have a very large 2-D and 3-D database offshore in Lebanon, which shows a lot of prospectivity, and over other areas in the Mediterranean that indicate great potential throughout the region.”

Norwegian, Russian Arctic

“The end to a land dispute between Russia and Norway could lead to the Barents Sea becoming an exploration hotspot next year,” Ziegler said. “However, the challenge for oil companies is the political environment, getting into the region with Russian partners.” There also are drilling challenges such as the fairly short weather window.

The Norwegian Petroleum Directorate’s (NPD’s) acquisition of 2-D seismic data covering 13,200 km (8,202 miles) in the new Norwegian maritime zone northeast in the Barents Sea could further stimulate interest. “The areas surveyed this summer are not opened for petroleum activities, and we know little about the subsurface conditions there,” Sissel Eriksen, the NPD’s exploration director, said in a news release. “The mapping will provide important knowledge of these parts of the shelf.”

Heightened activity also could be on the horizon for other parts of the Norwegian Continental Shelf considering the high level of interest from companies wanting dibs on acreage in mature areas of the North Sea and Norwegian Sea. The NPD said it has received applications from 50 companies vying for a total of 377 blocks or partial blocks covering 103,029 sq km (39,780 sq miles). The blocks, including new acreage in the Aasta Hansteen area, are expected to be awarded in 2014. For the 23rd round companies may nominate blocks to be included.

“They will start to see license rounds in the previously unexplored zone, and oil companies are looking closely at this area,” Ziegler said. “There will be some jockeying for position, better understanding the geology, and nominating blocks to go into future license rounds. I imagine there will be quite a bit of interest there.”

Myanmar, Australia

Following the suspension of sanctions by the US and the EU in 2012, experts believe Myanmar will see more action in 2014. The government already has made onshore blocks available during licensing rounds in January 2013, and the future could hold another round for 30 offshore oil and gas blocks (11 shallow-water and 19 deepwater).

The Southeast Asian country is stepping up its efforts to lure companies as it aims to tap an estimated 2.2 Tcm (72 Tcf) of gas and 540 MMbbl of crude oil. “It is clearly an energy-rich country and has large reserves of oil and natural gas,” Ziegler said. “There is likely to be major interest in Myanmar as it moves into licensing round mode in 2014. Offshore, it remains unexplored.”

Whether or not exploration takes off will depend on whether companies are amicable to the government’s production-sharing contract (PSC) terms. Under the new model PSC, the Myanmar government has increased royalty payment to 12.5% and state equity to 25% in discovered fields, E&P reported in October. The changes are up from 10% and 15%, respectively, in the previous model. Profit split also has been raised as an area of concern.

“Exploration activity in Asia has stayed relatively strong mainly just because of the objectives of the big national oil companies – the Chinese in particular but also the Indonesians and Malaysians,” Mellen said. “Myanmar shows a lot of potential, but people aren’t giving up on Indonesia, and even in Australia, there is still a lot of gas to be found.”

Ziegler added, “Australia’s Northwest Shelf, a predominately gas domain – although there is some oil – continues to attract interest. “The challenge is keeping the LNG industry competitive, as global production will grow substantially in the next few years with supplies from several sources expected to rise significantly, including East Africa. Shale is likely to play a key role in the competitiveness of Australia’s LNG industry,” he said, noting PGS has built a substantial library here in recent years, including the addition of new 3-D data in 2013 that increase focus on identified reservoir targets. “There have been some recent finds in the Browse basin, which are keeping the interest going from an exploration perspective. It’s a big area with some big prospects.”

Greece, Ireland

Another previously overlooked area is offshore Greece, which could be the site of more activity next year, given the promising outlook in nearby plays. That corner of the Mediterranean is generating a lot of interest, according to Ziegler. “[Greece] will probably be in a license round sometime within 2014. We worked with the government to acquire a large grid of data offshore western and southern Greece to allow companies to screen the area in advance of a license round,” he said. PGS announced in July 2013 that it had acquired new 2-D multiclient seismic data to support the license round.

Traveling northwest across Europe, Ziegler also believes Ireland will attract exploration interest next year, particularly in the frontier Porcupine and Celtic Sea areas.

Despite an ExxonMobil-operated wildcat offshore Ireland in the Porcupine basin hitting a water-bearing reservoir and subsequently being plugged and abandoned, hope remains in the area.

Tony O’Reilly, CEO for well partner Providence Energy, said in a news release that the well “demonstrated that all of the key components of a working petroleum system exist in the southern Porcupine basin. These data are encouraging not just for the adjacent Dunquin South prospect but also for the basin in general and are likely to intensify the already growing industry focus on this emerging hydrocarbon exploration arena.”

Cairn Energy also is among the companies with exploration plans set for offshore Ireland. Earlier this year the company farmed into a 38% working interest in two exploration licenses and one licensing option covering 2,753 sq km (1,063 sq miles) in the Porcupine basin. In addition, the company entered a contract to secure a drilling rig for a planned Spanish Point appraisal well with drilling operations set to start in 2Q 2014.

North and South America

“Across the Atlantic, the US and Canada will stay the base for lots of exploration activity,” Mellen said. And if the Mexican government pushes through energy reform plans, “we could start to see some activity in the Mexican part of the GoM assuming they go forward with changes to their contracting. The big oilfield services and the drillers would love to get into those plays.”

Timing-wise, however, it will be difficult for Mexico’s deepwater GoM to become an exploration hotspot in 2014, he added, noting exploration activity is more likely to ramp up in 2015.

But the mature areas of the US GoM will remain among the exploration hotbeds, according to Ziegler. “It’s a very important oil-producing area with a fairly established lease rollover. I think we’ll see it still playing an important part in companies’ portfolios.”

Statoil’s success also could stimulate interest offshore Canada. Recoverable oil reserves for Statoil and partner Husky Energy’s latest discovery there, the Bay du Nord, are between an estimated 300 MMbbl and 600 MMbbl. The discovery marked Statoil’s third in the frontier Flemish Pass basin, where it also has its Mizzen find – estimated to hold a total of 100 MMbbl to 200 MMbbl of recoverable oil – according to a news release. The other discovery, Harpoon, was announced in June, but Statoil has not confirmed volumes.

Farther south, the northeastern coast of South America in what’s called the Transform Margin is potentially very attractive, according to Mellen. “The idea is that the formations off the northeast coast of South America are the counterparts to what we’re seeing in West Africa,” he said. “The thought was those two continents were together [millions of years ago]. The underlying geology is thought to be related.”

And Brazil is in an exploration class by itself, Mellen added. In addition to presalt action, 2014 could see onshore shale activity in Brazil depending on how quickly exploration programs take off following the 12th bidding round that offers more than 163,000 sq km (62,935 sq miles) spanning seven onshore basins. The frontier Sergipe basin offshore Brazil also could see plenty of action. Petrobras said in September that the results of extension well 3-SES-176D (3-BRSA-1178D-SES), informally known as Farfan-1, confirmed the extent of the previous light oil discovery in the Farfan area.

“Brazil has had lots of exploration activity in the last five years, and it looks like the next five years are going to be as exciting,” Mellen said.

Spending flattens

Despite the potential for a worldwide hotbed of activity, exploration spending is not expected to eclipse those of previous years. Both Ziegler and Mellen believe that the amount of money companies dole out for exploration will increase but that growth will not be as high as in the past three years or so.

“Companies’ increasing investment levels and fairly static oil prices have put pressure on E&P companies’ cash flows,” Ziegler said, meaning there will probably be slower growth in terms of E&P spending. “In the offshore segment where PGS operates, we believe that we will see a reasonable growth toward 2015 but maybe not quite the amount of growth we saw in the previous three years.”

Offshore exploration expenditures will be driven by several key areas that have played a big role in exploration activity in recent years. These are Brazil, the US, Norway, Angola, and Australia, he said.

Between 2000 and 2008, exploration spending was increasing year-over-year by 18% to 20%, Mellen said. However, in the last three years it’s been down around 15%. He believes exploration spending will grow between 10% and 15% in 2014. Global exploration spending was approximately $100 billion for 2012.

“I think the industry had a lot on its plate. There has been a lot of volatility in the market,” Mellen said. But a “15% increase is still pretty strong. It’s just backed off a little bit from what we saw in the early part of 2000 when there was probably more concern that we were running out of oil and needed to look harder. It has stayed reasonably strong.”