Wood Mackenzie said its 11th annual exploration survey shows the oil and gas industry foresees a return to profits enabling exploration of promising prospects. WoodMac surveyed 258 senior energy leaders and exploration professionals worldwide.
Andrew Latham, WoodMac vice-president, exploration, said, “We’re seeing a continued recovery in the exploration sector…borne out by the drilling plans and new licenses we’re seeing.”
Conventional exploration remains the primary resource replacement option, he added.
Survey respondents said lower exploration and development costs are helping operators return value to shareholders.
High-quality deepwater prospects in Brazil, Guyana, the Gulf of Mexico, and the East Mediterranean are attracting exploration investment (OGJ, May 6, 2019, p. 36).
WoodMac said survey participants expect a $40-billion worldwide exploration budget in 2019 with drilling accounting for half of that and 25% for geological and geophysical surveys. Digitalization accounts for about 8% and is expected to increase as new seismic processing techniques, machine learning, and artificial intelligence become fundamental tools.
Digitalization
Latham said, “Digitalization offers exploration the possibility of better resolution of the subsurface, better seismic modeling, and growing use of automated interpretation.”
He added digitalization has become a consistent element on the surveys. Efficiency gains mean that doing more with less has become standard.
“While there is more investment in the exploration pipeline, that cash goes farther than before,” Latham said. “According to our survey, the industry is confident that it can break even with an average oil price of around $50/bbl.”
About 22% of survey respondents believe exploration can break even with Brent in a $55-60/bbl range while another 18% are comfortable in the $45-50/bbl range. Before the oil price crash started in late 2014, companies considered $80/bbl to be breakeven price.
Survey respondents said less project complexity improves exploration economics. Explorers are looking at prospects in less challenging basins, which Latham said both cuts costs and reduces drill time–in some cases by as much as 30%, allowing for quicker project development.
About 36% of those surveyed said they will invest more on exploration in 2019 while 13% reduced their budgets from 2018. When asked about drilling plans, 38% of survey respondents planned to drill more wells this year while just 10% of respondents expect their well count will be lower than in 2018.
Contact Paula Dittrick at [email protected].
