Rystad Energy: Global oil and gas exploration shrinks as companies shift focus to lower-risk core assets and regions

Global spending on exploration has been falling in recent years as oil and gas companies seek to limit risk by focusing on core producing assets and regions with guaranteed output, aiming to streamline their operations and build a more resilient business amid market uncertainty and the threat of a recession.

The political landscape is also contributing to the decrease in license awards, with many governments pausing or halting leases and encouraging companies to wrap up exploration activity within already awarded blocks. This trend is likely to continue as governments are less eager to invest in fossil fuel production and instead look ahead to a net zero future.

Global exploration activity has been on a downward trend in recent years, even before the Covid-19 pandemic and oil market crash, and that looks set to continue this year and beyond. It is clear that oil and gas companies are unwilling to take on the increased risk associated with new exploration or exploration in environmentally or politically sensitive areas”, Aatisha Mahajan, vice president of analysis, Rystad Energy

Drilling into the awards

Brazil is the largest contributor in terms of blocks awarded so far this year, with 59 auctioned during its Third Permanent Offer Round. European majors Shell and TotalEnergies took all eight offshore blocks on offer – six and two, respectively. The remaining 51 onshore blocks in the Tucano, Espirito Santo, Potiguar, Reconcavo and Sergipe Alagoas basins went to regional players 3R Petroleum (six blocks), NTF (two), Petro Victory Energy (19), Origem Energia (18), Imetame Energia (three), Petroborn Oleo (two) and CE Engenharia (one).

Other sizeable block awards after Brazil were Norway with 54 new licenses in its APA 2021 round, India with 29 blocks its OLAP Rounds 6 & 7, and Kazakhstan’s fourth oil and gas auction round, in which 11 blocks were awarded. There was also some sporadic activity in Africa between January and August, with Egypt providing rights to explore in nine blocks and Angola granting two blocks. South America also saw an offshore licensing round in Uruguay, where three exploration blocks were awarded – blocks OFF-2 and OFF-7 to Shell and Block OFF-6 to US independent APA. Challenger Energy signed a 30-year license for OFF-1 through direct negotiation with the government.

Read the article online at: https://www.oilfieldtechnology.com/exploration/09092022/rystad-energy-global-oil-and-gas-exploration-shrinks-as-companies-shift-focus-to-lower-risk-core-assets-and-regions/