2023 recovery and developing exploration trends
Oil and gas companies have kept a tight rein on exploration spending following the market crash in 2015 and, more recently, the damage wrought on global oil demand due to the Covid-19 pandemic. A rise in oil prices last year – which led to Brent crude surging over $100 per barrel following Russia’s invasion of Ukraine before falling to around $85 per barrel currently – has not led to a subsequent hike in exploration capital expenditure (capex) this year. In 2013, the last time Brent crude prices were around $85 per barrel, E&P companies spent over $120 billion on global exploration. Although we anticipate exploration capex will increase this year, we do not expect it to exceed $55 billion, which is still 4% lower than in 2019.
Read our special insight from Aatisha Mahajan, Vice President of Upstream Research at Rystad Energy.
With the metaphorical clock of energy transition ticking, the need for fruitful exploration in current times is highly chancy. Exploration trends indicate that this year’s increase in exploration spending is not leading to any significant results, with just 2.6 billion barrels discovered in the last six months. This is 42% lower than volumes found in the same period in 2022. The drop in discovered resources can be attributed to lower conventional drilling activity, along with unsatisfactory results from some of high-potential wells during the first half of 2023.
As it becomes harder to find new volumes, new exploration trends will increasingly shape company strategies. For example, companies are moving into prospective frontier basins which offer fewer geopolitical and environmental risks. This category includes basins along the South American and African fringe of the Atlantic Ocean. These areas hold a significant interest, with recent successes in the Guyana and Orange basins raising hopes of additional prospectivity. This had led to marked interest in the acquisition of frontier acreage especially in Uruguay where Shell is the country’s key acreage holder.
Gas exploration is another key trend as companies shift away from finding oil to target gas-rich basins which were previously deemed unattractive but are now appealing due to rising demand for natural gas globally. An increase in deepwater drilling in the East Mediterranean and the rise of exploration in Oman, UAE and the Southeast Asia region is largely because of the rejuvenated interest in gas. For example, despite its modest exploration efforts in 2021, BP has acquired deepwater blocks in Indonesia which are expected to hold significant gas potential. Similarly, the Norwegian government is opening new acreage for exploration in the Barents Sea to enable explorers to target its gas-rich potential.
Basin reports enable our clients to evaluate premium basins in different categories.
In 2023, Rystad Energy has launched a new report series providing our clients with insights into multiple oil and gas basins based on their maturity or subsurface characteristics. We have published three such reports in which we evaluate multiple basins globally based on a set of exploration, economics, and sustainability criteria.
In the first edition of our Basin Report Series on infrastructure-led exploration (ILX), we established that ILX was the preferred exploration strategy in the shelf regions of the Viking Graben, Niger Delta, and Central Graben and in the Southeast Asian basins of Malay Tho Chu, Sarawak, and Sabah Baram. Deepwater ILX is dominated by discoveries in the US Gulf Deepwater Basin.
In the second edition of our Basin Report Series on frontier basins, we noted that over the past decade, frontier basins have consistently contributed to more than a third of total discovered volumes annually. The third edition of our Basin Report Series noted that almost 45% of year-on-year global conventional hydrocarbon production comes from salt basins.