By May 23, 2016 Read More →

Conventional oil, gas discoveries outside North America continue to decline

2015 marked lowest year for discovered oil and gas volumes since 1952, IHS Says

discoveriesHOUSTON, Texas– Volumes for conventional oil and gas discoveries outside of North America have continued their multi-year decline, and the results are dramatic – just 12 billion barrels of oil equivalent (BOE, includes natural gas) estimated recoverable resources were discovered in 2015.

This is a record low since 1952, when discoveries reached just 7.8 BOE, according to new analysis from IHS.

The volume of oil alone discovered in 2015 was only 2.8 billion barrels, a record low since the significant ramp-up of oil and gas exploration began following World War II.

In terms of conventional global gas discoveries, IHS said more than 9 billion BOE of natural gas was discovered globally in 2015, marking the fifth straight year in which gas volumes discovered exceeded oil volumes discovered.

“The fall in discovered volumes for conventional oil outside North America, in particular, has been steady and dramatic during the last few years,” said Leta Smith, Ph.D., director, IHS Energy, Upstream Industry Future Service and lead author of the IHS Energy Conventional Exploration and Discovery Trends analysis.

Oil and gas volumes discovered in 2015 were the lowest in 64 years.

“We’ve seen four consecutive years of declining oil volumes, which has never happened before,” said Smith.

“The bottom has completely fallen out for conventional exploration, and the result portends a supply gap in the future that is going to be challenging to overcome. In the current cost-cutting environment, the outlook for 2016 discovery volumes is not likely to be better, either.”

With the significant drop in oil prices from a high of $100 per barrel in 2014, many companies have slashed exploration budgets repeatedly to address costs and falling earnings – and have continued to do so in 2016.

As a result, IHS said exploration and appraisal (E&A) drilling for conventional resources fell sharply in 2015, exacerbating the annual drop in resources found.

Last year, slightly less than 4,300 conventional E&A wells were drilled outside North America, as budgets for exploration were cut.


Alaska offshore oil drilling platform.

That figure compares to just slightly more than 5,200 conventional E&A wells drilled globally in 2014, and nearly 5,300 E&A conventional wells drilled in 2012, which was the peak year for E&A wells drilled during the years 2005 to 2015.

In deepwater (1,000 ft. deep to 5,000 ft. deep), Smith said the number of exploration and appraisal wells drilled worldwide dropped by more than 20 per cent, while ultra-deepwater (greater than 5,000 ft. deep) E&A drilling declined by more than 40 per cent, compared with 2014.

Deepwater activity in 2015 also showed a marked shift toward appraisal drilling as a portion of total exploration compared with prior years, and Smith said IHS researchers expect this trend to continue into 2016.

Smith said it is noteworthy to distinguish that this discoveries analysis addresses “conventional oil,” and does not include North American shale and its significant contributions to both discovered or produced volumes of oil and gas during the past decade.

“Companies are laser-focused on cost containment and extracting resources from previously discovered or developed assets, where risks and costs are lower, and project cycle times are reduced, until prices show some recovery,” said Smith.

Exploration is typically a high-risk and costly endeavor, but it has long been viewed as an essential investment for most E&P companies’ future in terms of reserves growth.

IHS researchers also observe that tight (shale) oil in North America is not enough to solve the discoveries shortfall.

“Despite its contributions to North American and global supplies, and extraordinary impact on portfolios and investment strategies for many companies, renewed growth in tight oil alone cannot cover the difference in the coming supply gap,“ said Jerry Kepes, vice president of IHS Energy and a co-author of the IHS discoveries analysis.

The lack of new discoveries, Kepes said, will also increase pressure on operators to develop discoveries already made, grow reserves in their producing fields with improved recovery techniques, change portfolios and investment strategies, or use mergers and acquisitions to restock portfolios in the medium term.

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