Conventional oil and natural gas discoveries over the past three years were at the lowest levels in seven decades, and there’s no sign of a significant rebound going forward.

In an IHS Markit report issued Tuesday, researchers said the dearth of discoveries followed a pullback in wildcat drilling on conventional targets over the past 10 years, and they plummeted after oil prices collapsed in 2014.

The trends have “far-reaching implications that could limit future conventional reserves additions,” the researchers said.

“One of the main drivers here is the shift of investment by U.S. independents from international exploration to shale opportunities in the United States — shorter cycle-time projects — with greater flexibility to respond to changing market conditions,” said lead author Keith King, who is an IHS Markit senior adviser. “These operators can quickly turn an unconventional project off and stop or postpone drilling next month if oil prices fall.”

The drop in conventional discoveries was driven not only by low oil prices but by competition from the short cycle-time unconventional projects. In addition the decline was blamed on financial investors that may question long-term, high-cost, frontier projects, according to IHS Markit.

“These factors, in turn, shifted drilling away from areas where potential discoveries could be larger, and reduced upstream exploration investment due to concerns about long-term oil demand.”

In addition to the overall reduction in conventional drilling, researchers identified additional reasons for the modest exploration results, notably that the average discovery size of conventional fields varies with the maturity of the basins being explored.

Basins that are early in their lifecycle, such as frontier and in “emerging phases” have average discovery sizes 10 times more than the average discovery sizes made in the later, more mature basins, the research found.

The average discovery size made during the last 10 years of these early lifecycle basins is around 210 million boe versus 25 million boe from mature basins.

The analysis also showed the differences between average discovery sizes in deepwater and ultra-deepwater areas compared to shallow water and onshore discoveries. Deepwater and ultra-deepwater was five or more times higher on average.

“Despite the larger discovery size associated with these deeper water and frontier/emerging basins, operators are drilling fewer wells in these areas,” said researchers.

For example, in 2014 161 new field wildcats, or NFW, which are exploratory wells drilled in unproven fields, were drilled in deepwater and ultra-deep water; by 2018 that number dropped to 68 wells. Drilling in frontier/emerging-phase basins declined by a similar amount.

In the current risk-averse environment, the industry appears to be siding with drilling in mature basins near existing infrastructure, where operators can bring a project online in two-to-three years, IHS Markit said.

“The industry will likely continue to invest more in less costly, less risky, quicker cycle time projects in the onshore and shelf, with deepwater investment remaining constrained,” King said. “There will be areas of intense activity in the deeper water depths and in frontier and emerging-phase basins as well, but overall, these areas will only see incremental gains.”

Some of the larger exploration and production companies, as well as a few of the independents with “better track records continue to pursue selective deepwater exploration, but this does not offset the industry trend in the aggregate,” researchers noted.

There are other “confounding issues” that may suppress additional conventional discoveries.

“First, there are fewer conventional new field wildcat wells being drilled globally,” researchers said.

In the United States, NFWs have declined by 60% since 2009. In addition, the percentage and absolute number of the wells drilled in areas with the largest discoveries have declined relative to areas with smaller discovery sizes.

Despite the significant challenges for conventional activity, there is a chance these trends could reverse.

“Lackluster financial returns from unconventional production onshore in North America may drive more operators back to conventional exploration in the longer-term,” King said. “Offshore companies have been able to substantially reduce the costs of building and operating offshore facilities necessary to develop resources in deeper waters.

“This renewed competitiveness could rekindle interest in conventional exploration where larger discoveries are made.”