A new study by Wood Mackenzie on what to expect from global oil and gas exploration in the year ahead, âGlobal Exploration: What to look for in 2017,â shows exploration should return to profitability in 2017 after five years of only single-digit returns.
Dr. Andrew Latham, vice president of exploration at Wood Mackenzie, said, âThe industry has a good chance of achieving double-digit returns in 2017. Smarter portfolio choices and lower costs are already paying off.
âMore than half of the volumes are expected to be found in deepwater. Here some well costs will fall to $30 million or less, with full-cycle economics that are positive at less than $50 per barrel.â
According to Wood Mackenzieâs report, the industry has cut exploration deeper than other upstream spending. Its share of upstream investment will dip to a new low of just 8 percent in 2017. An eventual return to historic norms â around one dollar in seven â depends on oil price recovery. Wood Mackenzie expects the Brent price to rise sharply from 2019, averaging $77 per barrel in real terms for the year. If this happens, then recovery in exploration spending will follow a year or two later.
âThe industry is focusing on acreage capture and reloading for the longer term,â said Dr. Latham. âCompanies willing to sign acreage with firm 2017 wells may be spoilt for choice. A spate of new licensing in outer-slope plays will continue as explorers digest news of better- than-expected reservoir quality and source rock potential in these ultra-deepwater settings.
âAfter a decade in the doldrums, the m ajorsâ returns from conventional exploration improved to nearly 10 percent in 2015. The rest of the industry is heading in the same direction. Fewer, better wells promise a brighter future for explorers.
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