As I See It text
Placing a priority on exploration
Discovering new resources is vital for meeting future demand.
Placing a priority on exploration
Discovering new resources is vital for meeting future demand.
A long-exposure photograph of a large black and white ship on the open ocean with an oil rig and container ship in the far distance

t’s no secret that even before the pandemic knee-capped the industry last year, oil and gas exploration was mired in its own downcycle. With the notable exceptions of Guyana and Africa, major discoveries in more traditional and productive basins like the Gulf of Mexico and U.K. Continental Shelf have been few and far between.

And with many analysts predicting a peak may come soon—or relatively soon at least—it’s fair to wonder if we’ve seen peak exploration as well. Considering the early stages of the energy transition evolution the industry currently finds itself in, it would be unwise to discount the role exploration can play.

Natural gas is widely seen as the transition fuel in the energy transition. However, exploration for natural gas has so far not reflected this view. According to a recent report issued by Westwood Global Energy Group, 32% of high-impact wells drilled between 2011 and 2019 targeted gas prospects, with the highest portion coming in 2019 when 45% of wells targeted gas. In its report, Westwood claimed that there is no evidence that this year will see more drilling plans targeting gas.

“In fact, 2021 is expected to see the lowest proportion of high-impact exploration wells targeting gas in more than a decade,” Westwood stated.

One reason for this, however, is that the industry has already produced more natural gas than it needs as a result of high-producing oil-heavy wells also generating natural gas. According to Westwood, about 36 Bboe of gas discovered between 2008 and 2016 remains in the ground without plans for development.

The noticeable decline in exploration isn’t only limited to gas projects. According to Rystad Energy, exploration needs to speed up “significantly” if the oil and gas industry is to meet future demands through 2050.

“To meet the global cumulative demand over the next 30 years, undeveloped and undiscovered resources totaling 313 billion barrels of oil need to be added to currently producing assets,” Rystad reported.

The demand for oil may well be tapering off, and by most accounts it isn’t likely to reach pre-COVID-19 levels. But that doesn’t mean producers should abandon trying to find new resources. Meanwhile, service companies in the exploration field are steadily bringing new technologies to the market that make identifying pay zones more efficient and more effective.

COVID-19 has effectively up-ended the oil and gas industry, and companies across the value chain have examined and reexamined their operations with the goal of being as financially efficient as possible. Concurrently, the energy transition has gained steam and put natural gas into focus. The demand for natural gas will be there, even if it might not be long term for oil. Now it’s up to the producers to find it.

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Brian Walzel
Exploration needs to speed up significantly if the oil and gas industry is to meet future demands through 2050.
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