Managing director Dr. Keith Myers said that the dip in oil prices had led companies to cut their exploration budgets typically by more than 70%.
“Sustained oil prices above $60/bbl are needed to stimulate exploration,” he suggested. “The geology economic to explore at $40/bbl is actually quite limited.”
REP’s report follows analysis of more than 1,100 exploratory wells and covers $49 billion of exploration drilling spend since 2010.
Among its findings are:
• Commercial oil discoveries fell to an eight-year low in 2015 as plays matured and the frontier program failed to deliver sufficient replacement reserves in emerging oil plays. Over a five-year period $17 billion of frontier drilling spend generated 16 new commercial plays in 12 different basins with a commercial success rate of 8%.
• Less than half of the 40 study-group companies replaced production through conventional exploration over five years, although 25% made discoveries that transformed their resource bases.
• Below $60/bbl, even allowing for cost reductions, the number of commercial discoveries drops: only 40% of the discoveries potentially commercial at $60/bbl are economically viable at $40/bbl. Of the 57 offshore oil plays that delivered discoveries in the study period, only 12 produced finds of a size potentially commercial at $40/bbl.
Dr. Myers said: “Industry has learned some hard lessons from the downturn – many companies overcommitted to drilling wells in order to access acreage. [The report] makes it clear that the increased drilling did not lead to more success and that the risks of certain plays were systematically underestimated.
“While exploration strategy is being reset across the industry, there is a real opportunity for companies. The transition from financial crisis, to a growth crisis once oil prices recover, will be rapid. Those that can maintain investment and upgrade their portfolio through the cycle will be the ones to prosper.”
Share your news with Offshore at email@example.com