Oil and Gas Exploration Economics to Improve

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After a difficult few years, the oil and gas exploration sector is back in the black – and keen to stay there, according to new analysis from Wood Mackenzie.

Dr. Andrew Latham, vice president, Global exploration, said: “We are seeing a long-overdue recovery in the sector. Last year conventional exploration returns hit 13 percent - the highest calculated in more than a decade. As 2018’s discoveries are appraised and projects move through the development cycle, we expect these economics to improve further.”

In 2018, exploration added at least 10.5 billion barrels of oil equivalent (boe) in conventional new field volumes. This was split 40:60 oil to gas. Last year saw three play-opening discoveries – Ranger and Hammerhead on Guyana’s prolific Starbroek Block and the Dorado find, which confirms a new liquids play in the Roebuck sub-basin, offshore Australia.

Last year also saw three giant finds – Novatek’s 11.3 trillion cubic feet North Obskoye gas find offshore Russia, the Calypso gas discovery, offshore Cyprus, and Guyana’s Hammerhead. This trio, together with the 18 large discoveries made last year, account for 80 percent of the total discovered resources.

Latham says: “The Americas will receive a lot of attention this year. Latin American plays account for one third of global large and giant prospects scheduled for drilling in 2019. This region will also see one-third of the potential play-opening wells. Exceptional reservoirs in Brazil, Guyana and Mexico will attract the most investment. We expect billion-barrel scale volumes from these emerging and newly-proven plays, as has been the case in the last couple of years.”

Southern and western Africa will also see a resurgence in offshore exploration, and worldwide, 2019 discoveries are expected to add around 15 billion-20 billion boe of new resource. This could come from discoveries such as Peroba, a giant pre-salt prospect in Brazil’s Santos basin, estimated to hold in-place volumes of more than five billion boe. Peroba lies on trend with the giant Lula discovery. If the well is successful, partners Petrobras, BP and CNODC are likely to be sitting on a very significant find.

Additionally, Brulpadda-1 in South Africa’s frontier Outeniqua basin has estimated volumes of around one billion boe. Nour-1 in Egypt’s prolific Nile Delta has estimated volumes of around 860 million boe.
Kingsholm-1 in the U.S. Gulf of Mexico’s prolific Mississippi Canyon area has estimated volumes of around 300 million boe, and the Jethro prospect on the Orinduik Block offshore Guyana, has estimated volumes of around 200 million boe in the same play as the recent Hammerhead find.

Latham notes that fewer companies are drilling fewer wells, and many companies, regardless of size, have cut their exploration spend. “We expect companies will focus on their best prospects, with global exploration and appraisal spending for 2019 staying close to its 2018 level of just under $40 billion per year.”


The Maritime Executive

 

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The magazine JŪRA has been published since 1935.
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