COWES, UK – Richmond Energy Partners measures annually the pulse of international conventional exploration outside North America by monitoring the performance of 40 E&P companies over a five-year period, together with drilling plans for 2014. The study covers $32.5 billion of exploration drilling spend over 5-years and $8.4 billion planned spending for 2014.
Managing Partner Keith Myers commented that exploration for conventional oil and gas is alive and well and continues to be very successful for selected companies. “There is no shortage of commercial discoveries being made, and 2013 was the best year for oil discoveries for five years,” he said
The key messages from the 2014 report are that commercial success rates are being maintained at around 1 in 3 globally with a finding cost of $1 per barrel of oil equivalent over the last five years.
Gas inEast Africa, Israel, and Australia makes up half of the 35 Bboe discovered by the companies analyzed and so boost the exploration statistics. Although these gas discoveries are commercial, much of this gas will take decades to produce and monetize. In fact, the study finds 40% of recent discoveries have still not progressed to development six years after discovery.
The industry faces other headwinds, too. Key plays in East Africa and Iraq are maturing rapidly and delivering smaller discoveries. In addition, the dramatic increase in spending on frontier drilling in recent years has been largely disappointing, with a success rate of less than 10%. The new presalt play in Angola has become the key emerging play globally.
The high cost of frontier drilling in deep water, coupled with very little commercial success can be a company breaker, as much as a company maker. With $2.9 billion budgeted in 2014 for deepwater frontier wells, 2014 may be literally a make or break year for several exploration companies.
“While the headline numbers are encouraging, success is concentrated in only a few geological plays and companies,” Myers said. “At $100 million average cost per well, industry exploration performance in frontier deepwater plays in particular has simply not been good enough recently. There is great pressure to deliver in 2014.”