Exploration is staging a remarkable turnaround in its fortunes, with a string of big discoveries in recent months.
Many of these look to be potentially commercial, a sign that the industry can still create value. This is the only KPI that matters – the one that if proven consistently, will propel exploration back into a central position in resource capture strategy.
Oil discoveries with at least 2.5 billion bbls (recoverable) have been made in deepwater around the Atlantic margin alone. ExxonMobil’s wildcats in Guyana continue to discover oil. The recent Ranger well, which opened a new carbonate play (500 mmboe, 2018), lies further offshore from the six sandstone discoveries made since 2015 (which hold yet another 2.9 billion bbls of oil).
In the US Gulf of Mexico, the Whale (Shell, 450 mmboe, 2017), Ballymore (Chevron, 400 mmboe, 2017) and Dover (Shell, 100 mmboe+, 2018) discoveries are all high-value. On the Mexican side, Talos’ Zama discovery (430 mmboe, 2017) and Eni’s many wells (Amoca-Mizton-Tecoalli, 450 mmboe, 2017) are a promising start to IOC exploration in the previously closed PEMEX monopoly.
Away from the deepwater, the last few winter drilling seasons have seen ConocoPhillips, Repsol, Armstrong Oil and Gas and others open up a major new onshore oil play in Alaska (the Nanushuk sandstone) with multibillion-barrel potential. Gas explorers have also notched up important finds in deepwater.
Kosmos BP continues to add huge gas resources in Senegal (Yakaar, 15 tcf, 2017) and Eni has made a giant gas find in (Calypso, 7 tcf, 2018) which confirms the extension into Cyprus waters of the reef play opened up by the 2015 super-giant Zohr discovery in Egypt.
Exploration results in the decade to end 2016 were a litany of woes. Rising costs through that period meant that spend on exploration rose progressively, but fewer wells were drilled. Geological success rates held good at more than one in three wildcats, but commerciality plummeted, the economics undermined by high project development costs.
Few discoveries achieved FID, and full-cycle returns across the industry fell to low single digits, averaging just 5% in 2016. At this low ebb came the collapse in oil prices.