Energy intelligence group Westwood feels that now is the best time to explore for oil and gas in the last decade.
In an article written as an introduction to its State of Exploration report, Westwood said renewed optimism was the theme for exploration in 2018, driven by higher oil prices and improving exploration performance.
“The cost of exploring has fallen more than 50% since 2013/14 and there are fewer companies competing for acreage. It could be argued that there has not been a better time to be exploring in the last decade,” the article, signed by Westwood’sd President, Research, Keith Myers, said.
According to Westwood, the geology economic to explore increases considerably above $60/barrel and in the first quarter of 2018 the oil price averaged $67/barrel. Success rates have improved as lower exploration budgets have led to companies being more selective.
Westwood has stressed that the effort and money expended on finding another large deepwater oil province in the Atlantic Margins has finally borne fruit in Guyana, where Exxon has struck a string of oil discoveries and is already working on the development of some of them, most notably, the Liza discovery.
Several big discoveries were made in 2017 to excite the industry. New geological models have emerged that make new geography in deep water look prospective and the opening of Mexico to IOCs has already led to successes.
However, Westwood sees challenges too – frontier success rates remain stubbornly low and new oil plays like Guyana remain elusive. Exploration performance is very variable and still needs to improve further.
Westwood says its report has found that exploration drilling activity in 2017 was little changed compared to 2016 but performance was strong with discovered volumes more than double that of 2016, overall commercial success rates rising to a record high of 47% and record low finding costs of <$0.5/boe.
Furthermore, success rates were driven by near-field drilling in lower risk mature plays onshore Colombia and Australia whilst volumes were influenced by a few large discoveries, primarily in emerging deep water plays such as Guyana and Senegal.
No Zohr lookalikes
According to the energy intelligence group, true frontier plays are thin on the ground and effective high grading of frontier opportunities has not been evident in drilling results. There was no significant frontier discovery in 39 attempts since Zohr in mid-2015, with Guyana emerging as the biggest new oil province since the Brazil pre-salt.
For 2018, exploration drilling is expected to increase by 12% and budgets by 7%, with around 60 high impact wells planned globally for the remainder of 2018 focused in the Atlantic margins, Gulf of Mexico and the Caribbean.However, the risk profile of the wells being drilled in 2018 has increased and the improved performance seen in 2017 may not be sustained in 2018, Westwood said.