• 4 minutes Is The Three Gorges Dam on the Brink of Collapse?
  • 8 minutes The Coal Industry May Never Recover From The Pandemic
  • 11 minutes China Raids Bank and Investor Accounts
  • 2 hours Biden admits he has been tested for Cognitive Decline several times. Didn't show any proof of test results.
  • 28 mins During March, April, May the states with the highest infections/deaths were NY, NJ, Ma. . . . . Today (June) the three have the best numbers. How ? Herd immunity ?
  • 5 hours Putin Forever: Russians Given Money As Vote That Could Extend Putin's Rule Draws To A Close
  • 16 hours Apology Accepted!
  • 42 mins Tesla Model 3 police cars pay for themselves faster than expected, says police chief
  • 3 hours The Political Genius of Donald Trump
  • 18 hours U.S. natural gas at major disadvantage in Europe and China.
  • 19 hours Biden came out of his basement today (Thursday) and said , "we have 120 Million deaths from Covid 19.
  • 2 hours Why Oil could hit $100
  • 19 hours Putin Paid Militants to Kill US Troops
  • 24 hours Per most popular Indian websites it was Indian troops not Chinese troops breach of LAC that caused the clashes. If you know any Indian media that claim to the contrary please provide the link
  • 24 hours The world is headed for big problems - interview with very smart economist
  • 1 day CoVid in Spain, 9 months before China
Lithium Prices Are Set To Rally

Lithium Prices Are Set To Rally

The European Union’s green recovery…

Oil Prices Fall Back Below $40 On New COVID Fears

Oil Prices Fall Back Below $40 On New COVID Fears

Oil prices have fallen below…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

The Pain Is Almost Over For Oil And Gas Drillers

The drilling segment of the oil and gas industry has suffered more than its fair share of trouble since the oil price crash began in 2014. Unlike upstreamers and refiners, drillers and other service providers have had to not just agree to reduce their prices substantially in order to remain in business, but they have also suffered the fallout from huge cuts in exploration spending.

This, according to a new report from Wood Mackenzie, is set to continue for another year: in 2017, the company estimates that oil and gas exploration investment will slump further still, to $37 billion. That would be the lowest exploration investment level since at least 2009. To compare, in 2014 exploration investment hit $100 billion.

In 2018, however, things will start recovering, Wood Mac analysts said, and by the following year investments in exploration should reach about $50 billion, growing further still in 2020 to $60 billion.

This should be good news for drillers, and particularly offshore drillers. This segment has been hit harder than land drilling because offshore wells are much costlier. Yet, faced with depleting wells both on land and in shallow waters, Big Oil is turning increasingly to deepwater offshore exploration in the so-called frontier regions, in a diligent search for untapped deposits.

One recent example is Shell’s launch of its second deepwater project in Malaysia, and it’s a very good example because it demonstrates the changes that Big Oil has had to undergo in the last couple of years to improve its resilience to price crashes and raise its successful discovery rates.

An older report from Wood Mac warned that the rate of successful oil and gas discoveries had fallen drastically over the last decade. Energy companies have poured billions into exploration projects only to find nothing commercially viable and, since 2014, have had to cancel projects because of the oil price crash. This is just what Shell did with its Arctic exploration program, which cost it $7 billion before it was shuttered. Related: Post OPEC Deal: Nigeria Plans To Increase Oil Output By 500,000 Bpd

Yet, this crisis has proved beneficial in a few ways: Big Oil is now leaner, smarter and more wary when picking investment targets. Also, it strengthened its focus on developing newer and more advanced exploration and production technologies to maximize returns and minimize cost.

Enter Shell with its Malikai deepwater project. Over the last 28 months, the company has made 16 discoveries along the Malaysian coast, uncovering oil and gas reserves of about a billion barrels of oil equivalent. Shell did this by combining cutting-edge technology with its undisputed expertise in exploration.

Deep waters are a major frontier region for future oil and gas investments and drillers, which as Wood Mac analysts note, have not sat idly by. On the contrary, like onshore drillers who have bet big on efficiency improvements to bring down costs in the cost-cut rush, offshore drillers have been working on their efficiency. As a result, the cost for drilling an offshore well should go down to $30 million or less, which, according to Wood Mac, will make these wells commercially viable even if oil remains around $50 a barrel.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • jeff m on December 15 2016 said:
    just sit back and enjoy the show. the hold story about cutting supply is one big lie. there just trying to stay in the game. trying to get 10 to 20 cents more. what a big big goof they are making. the USA is bitting at the teeth to shut them down. remember ISIS is run by oil money and when we take away the pay check they go away. and then the USA can get it on with IRAN in which they been wanting to do for a long long time. the end

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News