A new research fromWood Mackenzie has revealed that the oil majors invested $169 billion in exploration during the 2015-2016 period.
With the amount spent on exploration dropping by half in 2015 versus 2014, Wood Mackenzie’s report shows that the majors are also adjusting to the new economics of exploration, with industry facing a leaner but potentially more profitable future
The firm predicted that the oil and gas industry is poised to emerge from the slump leaner, more efficient and more profitable.
According to Wood Mackenzie’s new report “Exploration Benchmarking – Majors 2006-2015,” the majors invested $169 billion in exploration during the period analysed, adding a total of 72 billion barrels of oil equivalent (boe) to their resource base.
Of this, 25 billion boe comes from unconventional plays, while resource discovery costs for the period averaged $1.78/boe. The report also showed that returns over the period were not optimal, with returns of just six per cent, versus an industry average of 10 per cent.
Wood Mackenzie, however, noted that the majors moved quickly in 2015 to improve weak exploration returns.
The report said:“Steep cuts in exploration spending for the year have forced high-grading, which has led to enhanced prospect quality. Unconventionals are becoming increasingly important, attracting 15 per cent of the majors’ exploration spend and outperforming returns from conventional exploration since 2013.”
“Good conventional exploration volumes, together with large adds from unconventionals saw the majors add resources well ahead of the volumes they produced every year from 2011. Resource discovery costs also fell, with the lowest costs recorded in 2015,” the report added.
Commenting on the report, the Vice President of exploration research at Wood Mackenzie, Dr. Andrew Latham said “our research shows that a number of things needed to, and are, changing.”
He explained that one positive side effect of the downturn is that the majors have changed the way they approach exploration, leading to improved returns, even at lower prices.
