The results of Wood Mackenzie’s 11th annual exploration survey have been released, and the industry is optimistic. It has returned to profit, and the prospects look good.
Wood Mackenzie canvassed the opinion of 258 senior energy leaders and exploration professionals from across the global exploration sector, seeking opinion on a range of issues.
Dr Andrew Latham, Vice President of Exploration, said, “We’re seeing a continued recovery in the exploration sector, and this borne out by the drilling plans and new licences we’re seeing.
“A number of key themes emerged in our survey. Conventional exploration is still viewed as the primary resource replacement option. And lower costs, both for exploration and development, are key to exploration’s return to value creation.”
High-quality prospects in deepwater sweet spots, such as Brazil, Guyana, the Gulf of Mexico and the East Mediterranean, are attracting the most attention.
According to this survey, the global exploration budget will total about US$40 billion in 2019. Drilling will account for about half of that, while 25% is earmarked for geological and geophysical surveys. Digitalisation today accounts for about 8% of the total spend, but this will increase as new seismic processing techniques, machine learning and AI become fundamental tools for explorers.
Dr Latham said, “Digitalisation offers exploration the possibility of better resolution of the subsurface, better seismic modelling and growing use of automated interpretation.
He added: “Digitalisation has become a consistent feature on our surveys. The survey results back up our expectation that the exploration industry, led by the majors, will spend billions each year on digitalisation.”
Dr Latham noted that efficiency gains – hard-won during the downturn - mean that doing more with less is now standard. And while there is more investment in the exploration pipeline, that cash goes farther than before. According to Wood Mackenzie’s survey, the industry is confident that it can break even with an average oil price of around US$50 per barrel.
Around 22% of the survey respondents believe that exploration can break even with Brent in a US$55 – US$60 /bbl band, while a further 18% are comfortable in the US$45 - US$50 /bbl range. Four years ago, before the oil price crash, companies were looking at a break-even price of around US$80 /bbl.
According to survey respondents, exploration’s economics have been improved by the move towards less project complexity. Explorers are looking at prospects in less challenging basins, and as Dr Latham noted, this not only cuts costs, it helps improve drilling time – in some cases by as much as 30% - and allows for quicker project development. About 36% of those surveyed said they would be investing more on exploration this year, while only 13% had reduced their budgets from last year. An even greater number (38%) said they planned to drill more wells this year while just 10% of respondents expect their well count to be lower than in 2018.
Read the article online at: https://www.oilfieldtechnology.com/special-reports/15052019/wood-mackenzie-has-released-its-eleventh-annual-exploration-survey/