Worldwide oil and natural gas exploration is moving up, rising by 23% year/year in 2017 to 546 wells after plunging during the commodity price downturn in late 2014, according to 1Derrick.
Exploration wells drilled had risen to 1,331 in 2014 before falling to 444 in 2016, the oil and gas researcher said Wednesday.
Excluding drilling by national oil companies (NOC), exploration wells spud worldwide this year are expected to climb 19% year/year following a 31% increase between 2016 and 2017.
Major targets of new well activity likely will be led by South/Central America (112 wells), the North Sea/Europe (91 wells) and Africa (85 wells), according to 1Derrick’s exploration wells database.
“The curtailment of oil and gas exploration was one of the most dramatic effects of the steep drop in oil prices in late 2014,” said 1Derrick COO Mangesh Hirve. “Producer strategies shifted from long-term resource growth to short-term survival as they slashed capital budgets and shifted focus to cash-flow producing assets.
“The high-impact, expensive deepwater exploration was the biggest casualty,” with the oil majors that include BP plc, ExxonMobil Corp., Royal Dutch Shell plc, Chevron Corp. and Total overall cutting back on drilling by 75%. The five Big Oil companies together drilled 121 wells in 2013 and only 31 last year.
“However, that number is expected to grow by more than 50% to 48 in 2018 as oil prices have stabilized in the $60/bbl range.”
More than half of majors’ exploration wells are expected to target South/Central America, with 16 wells expected, followed by North America, primarily the U.S. Gulf of Mexico (GOM), with 10 prospective wells.
Among the high-impact wells is ExxonMobil’s Pacora-1 well offshore Guyana, which was spud in late January and is the company’s seventh oil discovery in the region.
Large-cap exploration and production (E&P) companies, including Anadarko Petroleum Corp., Apache Corp., Eni SpA, Repsol SA and Woodside Petroleum overall are planning to drill 49 exploration wells “focused primarily on deepwater wells” in the North Sea/Europe, the U.S. GOM and Asia/Australia.
The mid-cap E&Ps are likely to drill the most exploratory wells of any peer group this year, with most of the wells onshore in Australia and Colombia.
NOCs historically have drilled the most exploration wells, including about one-third of all spuds, or an average of 430, between 2011-2014, 1Derrick noted. However, the number of NOC spuds fell to about 134 in 2016 and 141 in 2017, only 26% of reported wells, said 1Derrick.
“The relatively slower recovery likely reflects the higher impact of the oil price plunge on state-owned institutions that lacked the flexibility to quickly cut spending and shift strategy,” according to researchers. “The pace of recovery in 2018 won’t be clear until the end of the year, because NOCs rarely disclose future drilling plans.”
The most active NOCs now include Brazil’s Petróleo Brasileiro SA, Norway’s Statoil ASA, Mexico’s Petroleos Mexicanos, India’s Oil and Natural Gas Corp. Ltd., Colombia’s Ecopetrol SA and China’s China National Offshore Oil Corp.
Regionally, the most rapid recovery in exploratory well activity is seen in South/Central America, where the well count nearly doubled to 104 last year from 56 in 2016. The gains were driven by “ExxonMobil’s dream run in Guyana and renewed development offshore Brazil.”
Producers for 2018 have announced plans to spud 112 wells, including potential high-impact wells offshore Guyana and offshore Suriname.
Perhaps not surprising, 1Derrick said the “most stable regions” for exploration are in North America, primarily the GOM, and in the North Sea/Europe, where drilling fell off less than 50% between 2014 and 2016.
“However, spuds are expected to decline by nearly 40% in North America from 68 in 2017 to 42 in 2018. This decrease is expected to be temporary, and the drilling activity is expected to boost in the long term as international firms begin drilling newly acquired offshore Mexican blocks.”
In the North Sea/Europe, spuds are expected to rise to 91 from 53, with high impact wells in the Barents Sea and offshore Portugal.
“While the 2017 and 2018 data demonstrate the pace of global exploration has stabilized, there are no indications that the industry will revert to 2011-2014 activity levels any time soon,” Hirve said. “Major oil and gas companies are continuing to high-grade rather than expand their portfolios, which are increasingly focused on lower-cost, high return resource plays.
“Despite spurts of drilling activity spurred by large discoveries such as ExxonMobil’s multiple finds offshore Guyana, significantly higher exploration likely depends on much higher oil prices.”