Senior Research Analyst, Global Exploration
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There has been enormous change in the upstream industry in the last year. Challenges around energy security, sustainability and price volatility all make for uncertain times. But could the external environment present a revitalised opportunity for exploration? What role will exploration play in providing alternative supply options to Europe? And could we see exploration capitalise on the enormous surplus cash in the industry?
We tackled these questions, and more, in Global exploration: 5 things to watch in 2023. Fill in the form on this page for a complimentary copy of the full report, and read on for a short introduction to a few of the key themes.
Energy security concerns have put all supply options back on the table
The energy environment has transformed almost beyond belief from a year ago. Russia’s invasion of Ukraine and a near doubling of commodity prices have thrown energy security into the spotlight. Exploration still had a role to play before the supply crisis unfolded. But there are now strong fundamentals to support more exploration to help reduce import reliance on Russia.
All supply options are back on the table. Exploration won’t be the short-term solution for keeping the lights on this winter in Europe, but it is a candidate for securing future supply. It could play a critical role in ensuring that Europe can meet demand and deliver energy security while pursuing its energy transition path.
Explorers will need to move fast to exploit opportunities.
A shift in regional spend to those countries best placed to plug the supply gap could be ahead, but explorers will need to move fast to exploit opportunities.
The search for advantage barrels continues
Prioritising advantaged resources, drilling exploration wells more efficiently and an increased understanding of the importance of decarbonisation will all play critical roles in 2023 and beyond.
Drilling levels will remain broadly similar to 2022, with some delayed drilling from 2020 still underway. High-impact, advantaged exploration will persist as a top priority for big explorers, accounting for the lion's share of exploration budgets.
Around 100 large or giant prospects targeting approximately 36 billion boe will be tested. The Majors and national oil companies (NOCs) will lead the way in this wildcatting, easily funded from their powerful financial positions.
Where are the wells to watch? Read the full report to find out more.
Exploration budgets won’t be booming
The upstream industry is awash with cash. The rapid rise in commodity prices over the last year has provided companies with enormous free cash flows and record profits. In previous upcycles we saw this flow through to sizeable uplifts in spend as companies ploughed money back into the industry.
This time is different. We expect long-term demand uncertainty and ongoing challenging optics will preclude any radical increases in 2023 exploration budgets. Instead, we expect only a modest change as budget increases will continue to prioritise portfolio improvement over growth.
However, commodity prices today do complement the performance and returns reset which took place in the industry during the downturn. We anticipate double-digit returns in 2023 and value creation of an estimated US$10 billion.
What other factors will shape exploration in 2023?
Will NOCs’ exploration dominance continue? Will they emulate the Majors and pivot towards gas-focused exploration? Read Global exploration: 5 things to look for in 2023 for our full set of predictions for the year ahead.