The twin crises of coronavirus and the oil price crash made 2020 a tumultuous year. Exploration faced budget cuts, campaign cancellations and team downsizing – but not all is lost. High-impact drilling has continued. And the fundamentals for profitability look set to stay.
We asked our experts what explorers will focus on in 2021 and what will shape the sector’s gradual recovery. Fill in the form on this page for a complimentary copy of the full report. Or read on for a short introduction.
Exploration will be less visible
We expect oil and gas to return to growth in 2021 as demand climbs slowly towards a plateau in mid-2030. The world will still need petroleum for its energy needs until beyond 2040, and exploration will continue to support that. But it will be much less visible than it was previously.
Oil and gas companies will focus on publicising their commitments to decarbonisation. We don’t expect much fanfare for the upstream spending and renewal that is necessary to fund that transition.
Explorers will continue to go quietly about their business as they focus on the highest-impact prospects. Companies will be extremely selective and will target only advantaged resources.
Exploration has increasingly become a realm for big players. Larger explorers consistently discover three-quarters of volumes and have more capabilities and financial means to follow through with commercialisation.
That trend will continue in 2021 with the Majors and large NOCs leading exploration activity. Even the Euro Majors that have set bold targets to be net carbon-neutral by 2050 will continue with some exploration activity to enhance upstream portfolios and fund decarbonisation ambitions.
The mood will stay cautious, but recovery is coming
As the sector slowly recovers, 2021 budgets and well counts will grow only modestly, if at all.
However, many companies are keen to resume drilling campaigns that were delayed in 2020. Drilling will ramp up slowly in the second half of the year as travel restrictions are lifted and operators find solutions to logistical challenges.
Exploration’s share of overall upstream spend will remain around 7% on average.
What other factors will shape exploration’s recovery in 2021?
Read ‘Global exploration: 5 things to look for in 2021’ for our full set of predictions for the year ahead. It includes our assessment of the hottest regions for exploration activity in the next 12 to 18 months.