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Oil Prices Rebound On Small Crude Draw

Oil Prices Rebound On Small Crude Draw

Oil prices rebounded today after…

Julianne Geiger

Julianne Geiger

Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.

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Expect A Strong Year For Oil Discoveries

Discovery isn’t dead. It’s just moved into trickier geological territory, but that’s not stopping the impressive advance. 

Despite growing anti-oil sentiment, oil and gas companies unearthed 12.2 billion new barrels of oil and oil equivalent last year, according to Rystad Energy—a figure that represents a four-year high—and offshore is where most of these new discoveries lie.

The figures suggest that the anti-oil movement has yet to have a tangible effect on exploration, and analysts are forecasting another bang-up year for finding even more oil and gas in 2020 and beyond.

Was 2019 A Flop for Exploration?

Rystad pointed to a disappointing year for high-impact wells, with over 10 billion barrels of estimated pre-drill volumes failing to encounter hydrocarbons. But such is the nature of high-impact, risky drilling. You win some, you lose some.

And many companies, such as ExxonMobil, won--big time.

According to Westwood Energy, which had a rosier outlook, 91 high impact wells were drilled last year, up 36% from 2018. And 2020 is shaping up to meet or even beat this figure. What’s more, the costs associated with this drilling fell in 2019. Overall exploration expenditures—at $3.5 billion—for these high-impact wells was little changed last year, because the average cost per well fell.

About 77% of these high-impact discoveries were gas, according to Westwood.

Where It’s At

When it comes to major 2019 oil finds, there is one word on the lips of anyone talking about offshore: Guyana. Or maybe ExxonMobil. Either way, we’re talking about the same thing—ExxonMobil, in partnership with Hess Corp and CNOOC, has raised the stakes in the global offshore oil game, single-handedly finding almost one-tenth of all the world’s oil found in 2019. Related: Has Natural Gas Hit Rock Bottom?

Overall, the oil found Guyana, including that from Exxon and Tullow, accounts for nearly 15% of all the conventional oil found last year. ­­­

Next up is Russia, where Gazprom found 1.5 billion boe in the Kara Sea, in the Rusanovsky and Nyarmeysky blocks off the Yamal Peninsula. 

Other conventional hotspots included Mauritania, Iran, and Cyprus to round out the top five.

Where It Isn’t

Mexico had a tough year for oil exploration, with all five high-impact exploration wells failing to come up with any commercial volumes. For 2020, international oil companies in Mexico have 10 wells set to test 2.5 billion barrels of unrisked prospective volume.

Other flops for high-impact drilling include NorthWest Europe, which tapped 27 wells, with just two of them turning out to be successes.

Offshore Complications

That 2019 was a record year for oil and gas exploration is even more impressive given that most of the increases were in offshore, which is far more complicated. Exxon’s Guyana find, for example, was in a particularly tough stratigraphic type of play--and it ended up being the most successful find of 2019. Related: Is $90 Oil Possible? An Interview With Jay Park

These stratigraphic plays do indeed carry a higher geological risk, and much of the oil left to be found exists in these types of plays. Given Exxon’s wildly successful find in such a difficult geological area, more companies are likely to jump into these higher cost opportunities. 

2020 and Beyond

The Middle East will have a big offshore game this year. According to Rystad, we can expect to see a dramatic increase in Middle East offshore exploration spending, with UAE expected to be the top spender at $1 billion by 2025, followed by Turkey with an expected $350 million in expenditures tied to offshore oil and gas exploration (hopefully not in disputed waters).

Westwood sees the 2019 level of exploration sustained through 2020, but sees high-impact well exploration in North West Europe slowing due to their lack of success last year. Westwood sees exploration in Guyana slowing this year too, simply because Guyana would likely be unprepared for more. Mexico has 10 wells by international oil companies testing 2.5 billion barrels of unrisked prospective volume in both frontier and emerging plays. Africa is expecting a repeat of 2019 as Recon CEO Jay Park recently explained in an interview with Oilprice.com. Australia, which had a rather subdued 2019 when it comes to exploration, should see a pickup in high-impact drilling.

Overall, Westwood sees 2020 as having similar exploration activity as last year, although there will be a shift of focus toward North and South America.

The top 2020 explorers will be the European supermajors Total SA, Equinor, Shell, and Eni, according to Westwood.  2019’s top explorers, according to Rystad, are ExxonMobil, Hess, CNOOC, and Total.

What’s missing from Rystad’s and Westwood’s exploration forecasts for 2020 is any mention of how anti-oil sentiment will dampen drilling.

For all the drilling ban proposals, lawsuits aimed at Big Oil, protests by anti-oil groups, pipeline saboteurs, and outspoken activists, fossil fuel divestments by financial institutions, oil and gas production and exploration carried on as usual in 2019, and it will carry on this year, too.

By Julianne Geiger for Oilprice.com

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