Analysts and energy industry executives are sounding the alarm about underinvestments in oil and gas exploration. This has been going on for years, and it is a recipe for shortages down the road.
But despite the industry as a whole spending less money on exploration and drilling only where it is virtually certain it would hit oil, exploration continues—especially offshore.
In 2023, oil and gas companies operating in the Gulf of Mexico announced eight new discoveries in the deepwater section of the area, Offshore Magazine reported earlier this month. Among these were Murphy Oil’s Longclaw-1 discovery and Hess Corp.’s Pickerel-1 well, which should start producing in the middle of this year.
Talos Energy struck oil at six of its exploration wells in the Gulf last year, per Offshore Magazine, and the results were so encouraging that the company combined organic growth with M&A, snapping up QuarterNorth Energy for $1.29 billion. The target company has several fields in the deep waters of the Gulf.
It seems the oil and gas industry is doing the best it can with the acreage it still has in the Gulf after the federal government recently approved the smallest number of lease sales for the next five years in history. Per the plans revealed last September, there will only be three offshore lease sales conducted between the years 2025 and 2029. Related: EIA Confirms Moderate Crude Build, Products Draw
The industry reacted as one would expect it to react to the news, with the president of the American Petroleum Institute commenting that “This restrictive offshore leasing programme is the latest tactic in a co-ordinated strategy to reduce energy production.”
“[This is] ultimately weakening America’s energy dominance, limiting consumers’ access to affordable reliable energy and compromising our ability to lead on the global stage,” Mike Sommers also said at the time.
Some have countered that despite the Biden administration’s pro-transition orientation, which automatically puts it at odds with the oil and gas industry, oil and gas companies have thrived. The ten biggest listed oil and gas operators in the U.S. saw their combined net earnings rise to $313 billion since 2020, from $112 billion in that year.
The argument appears to be that even though the Biden administration is tightening the regulation noose around oil and gas operators, it is giving them plenty of opportunities to make money. Indeed, it could even be argued that it is by this tightening that the Biden administration has enabled higher earnings—lower oil supply, or the threat of a shortage, leads to higher prices, which is largely where those higher profits came from.
Yet the U.S. Gulf of Mexico has not been the only place where oil and gas companies with enough money to spend on exploration have struck oil. Guyana may be the first place that comes to mind when one thinks about prolific offshore resources, but in 2023, Namibia emerged as a potential new hotspot.
In August last year, Shell announced its fourth oil discovery offshore the Western African nation. So far, Shell has tapped some 500 million barrels in recoverable oil reserves in Namibia’s Orange Basin, per the latest government calculations.
But Shell is not the only explorer in the Orange Basin. Portugal’s Galp also struck oil in the area last year, near one of Shell’s discoveries and one made by French TotalEnergies. TotalEnergies itself is drilling around its Orange Basin discovery, Venus, hoping to find more oil. Indeed, it has already struck more oil close to the Venus discovery.
China’s National Offshore Oil Corporation announced just this month that it had discovered what it says is the largest metamorphic rock oil field in the Bohai Sea. The field is already producing, per reports, but the proven reserves of the deposit have been revised lately, with new estimates putting reserves at more than 200 million cu m.
Elsewhere, Norwegian E&P Wellesley Petroleum last June made the largest offshore discovery in the country in a decade. Drilling work at the Carmen prospect in the North Sea revealed what Wellesley’s partner in the project DNO called “the largest hydrocarbon discovery” in 10 years, with recoverable resources estimated at some 120 to 130 million barrels of oil equivalent.
Equinor also struck new oil off Norway’s coast last year at two locations. While the resources at those locations are much more modest than the estimated resources of the Carmen prospect, new discoveries in the North Sea have become increasingly rare, which makes each new one significant.
Shell also made a substantial discovery in the North Sea in 2023. Located in the southern part of the basin, the Pensacola gas prospect is believed to be the largest to be discovered in more than a decade. Shell will be drilling an appraisal well at the site this year.
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Spending on new oil exploration has been falling steadily for about a decade now. Companies are being actively discouraged from new exploration by governments and activists who believe the world will not need more oil and gas going forward.
Even so, whatever exploration is still being conducted is yielding results, even if newly discovered resources are insufficient to replace lost supply from aging fields fully. But at least there is some replacement going on.
By Irina Slav for Oilprice.com
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