Energy consultant Wood Mackenzie Ltd. rated the biggest exploration successes in absolute terms during the last 10 years as Kazakhstan, the deepwater Gulf of Mexico, Angola, and Nigeria.
The conclusions appear in a study entitled, “Global Oil and Gas Risks and Rewards.” WoodMac analysts compared exploration performance and returns for international oil companies in 66 areas across 58 countries during 1994-2003.
WoodMac used proprietary data and commercial models specific to given fields and areas to assess the value created by exploration.
Graham Kellas, WoodMac vice-president of petroleum economics, said, “Kazakhstan ranks number one in terms of commercial reserves discovered, average discovery size, reserves discovered per well, and finding costs per barrel of oil equivalent.”
He listed the Kashagan discovery in 2000 in the Caspian Sea off Kazakhstan as the major factor.
The deepwater Gulf of Mexico ranked first for absolute value created and second for commercial reserves discovered. Both Angola and Nigeria recorded commercial success rates greater than 25% and scored highly in terms of reserves discovered.
WoodMac used internal rate of return (IRR) to measure exploration success. “On relative measures such as full cycle IRR and value created per boe discovered, there are some interesting results-the Netherlands ranks first on both criteria, for example,” Kellas said. It’s a mature area with limited upside.
“High commercial success rates, low exploration costs, and relatively lenient fiscal terms, however, combine to drive attractive risked economics,” he said of the Netherlands. “In fact, a low government take was found to be the most significant driver for generating high value/boe discovered.”
The study said the biggest disappointments included deepwater Brazil and Azerbaijan.
“Although originally hoped by IOCs [international oil companies] as being the new hot play, deepwater Brazil has been a big disappointment,” Kellas said. “No commercial discoveries have yet been made by IOCs, despite having spent nearly $1.5 billion in exploration and appraisal drilling and signature bonuses.”
Azerbaijan ranked second lowest in terms of value created. Shah Deniz field has large reserves of gas and condensate, but low gas prices, low success rates, and high costs have hindered value creation, he said.
Two thirds of the countries examined in the study created value, and there is no doubt that recent high oil prices enhanced the exploration performance in many countries, he said.
