ABERDEEN, UK --Commercial oil and gas volumes discovered globally fell to a nine-year low in 2016, according to Westwood Global Energy Group’s (WGEG) eighth annual State of Exploration Report.
This covers five years of global exploration results, the performance of 40 internationalE&P companies, and 991 completed conventional wildcat wells, drilled at a total cost of $43.5 billion.
WGEG attributed thedip in discoveries to the “lower for longer” oil price scenario that has led companies to keep cutting back on exploration, reducing their exposure to frontier deepwater and emerging play drilling.
However, the overall commercial success rate in 2016 was the highest in nine years at 35% of wells drilled, the report claims, 8% better than in 2015.
Average drilling finding costs increased to $2/boe in 2016 from $1.6/boe in 2015 due to the lack of large frontier and emerging play discoveries and the much smaller average discovery sizes.
Oil prospect finding costs averaged $3.1/bbl in 2016, down from $3.4/bbl the preceding year.
Among the report’s other conclusions are that around 88% of the 17.4 Bboe discovered by the REP40 peer group companies since the start of 2013 is still at the appraisal stage, reflecting the slowdown in progressing resources to production as a result of the oil price.
Well counts could be around 10% higher this year based on forward exploration drilling plans, although the number of wells drilled in 1Q 2017 was 35% down on corresponding period in 2016.
This year the report identifies plans for 62 high impact wells globally, targeting 19.5 Bboe of which 37% is oil. Twenty-four of the wells are onfrontier plays, 11 being across the Atlantic Margin and the Norwegian Barents Sea.
Dr. Keith Myers, president, Westwood Research, said: “If the industry is out of the emergency room in 2017, it is not yet out of hospital. Even if oil prices recover further, explorers will need to focus on finding low cost oil and gas profitable to develop at $40/bbl or less.
“Companies will need to believe they have the acreage portfolio, technology, people and processes to deliver exceptional performance. This means an efficient exploration process with larger prospect portfolios and fewer, better wells targeting bigger prospects at higher commercial success rates.”
“The industry is emerging leaner and fitter from this latest downcycle, but it must be able to remain disciplined during the bull oil market to come (whenever that might be). Decreased competition means lower access costs forexploration acreage and more opportunity to create value from exploration for the accomplished explorer.”