Exploration and production companies are drilling more high-impact wells this year, with a much higher success rate than in 2021. It is a positive sign for global oil and gas supply as activity is on the rebound.
High-impact exploration is back after a dismal 2021, which saw a low success rate—one of the lowest on record—in discovering new oil and gas resources, analysts say.
The much higher success rate at high-impact wells drilled so far this year is a good signal for global supply at a time when oil and gas prices are high, and trade has been upended following the Russian invasion of Ukraine and the subsequent sanctions and embargoes on Russian oil.
So far this year, E&P firms have discovered over 1.7 billion barrels of oil equivalent (boe) at high-impact wells, nearly quadruple the 450 million boe discovered for the whole of 2021, Rystad Energy research showed this week.
Per Rystad Energy’s methodology, high-impact wells are classified through a combination of factors, including the size of the prospect, whether they would unlock new hydrocarbon resources in frontier areas or emerging basins, and whether they are “focus areas” for the operator.
So far into 2022, the success rate at such wells has stood at 47%, much higher than the meager 28% success rate last year, Rystad Energy noted.
Companies plan to drill 33 high-impact wells in 2022, the largest annual number since Rystad Energy started tracking the sector in 2015. Although the number of planned wells is only slightly higher than last year’s 29 high-impact wells drilled, the success rate this year is much higher, with 1.7 billion boe estimated to be found so far in 2022, compared to just 450 million boe in the disappointing 2021, which saw success rates plunge towards record lows.
Unlike in previous years, oil and liquids accounted for most of the discoveries, with 1.2 billion boe or nearly 70% of the volumes this year, while gas discoveries were around 550 million boe, Rystad Energy says. To compare, gas has accounted for most of the discoveries in recent years. The high ratio of oil to gas discoveries in 2022 was chiefly the result of two significant oil discoveries offshore Namibia – Shell’s Graff and TotalEnergies’ Venus.
“Last year was disappointing for discovering gas and liquid volumes from high-impact wells, but 2022 is on track to make up for that slump. If the success rate seen in the first half of 2022 holds for the full year, we could be in for one of the most productive annual volumes total on record,” Rystad Energy senior analyst Taiyab Zain Shariff said.
Moreover, over half of the wells drilled so far in 2022 are considered a “focus for the company,” suggesting that more operators are narrowing their geographical range of exploration and focusing on core regions instead of frontier areas, Rystad Energy notes.
According to another methodology and classification of high-impact wells, activity is also rebounding and will pick up in the second half of 2022. Westwood Global Energy Group, which defines a high-impact well as targeting more than 100 million boe prospect or any frontier play test, said earlier this month that high-impact drilling activity will pick up in the second half of the year, with between 80 and 90 wells expected to have been drilled by the end of 2022, the highest number since 2019 when 98 high-impact wells completed.
For the rest of the year, South America will continue to be an exploration hot spot with more wells planned for the Suriname-Guyana basin and offshore Brazil, writes Jamie Collard, Senior Analyst – Global Exploration and Appraisal at Westwood.
After the successes offshore Namibia early this year, Africa will see a return to high-impact exploration in the second half, with key wells planned in South Africa, Mozambique, and Zimbabwe.
This year also sees a return to high-impact exploration in the deepwater of the Eastern Mediterranean after 2021, when no wells were drilled, Westwood says.
Following years of underinvestment in oil and gas, the return of high-impact drilling activity and higher success rates could be good signs for global oil and gas supply going forward.
By Tsvetana Paraskova for Oilprice.com
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