Unconventional output may be booming, but the low oil prices of the past 3 years has led to the lowest level of oil discoveries in the past 70 years.
Oil companies discovered less oil and gas in 2017— 7 billion BOE— than any year on record, the Norwegian research firm Rystad Energy said in a new report issued this week.
“We haven’t seen anything like this since the 1940s,” says Sonia Mladá Passos, a senior analyst at Rystad. “We have to face the fact that the low discovered volumes on a global level represent a serious threat to the supply levels some 10 years down the road.”
The previous record for low oil discoveries was 2016, when discoveries just topped 8 billion BOE. Those figures are down significantly from oil discovered earlier this decade, when discoveries topped 30 billion BOE in 2012.
The sharp drop is the result of a third consecutive year of low upstream exploration budgets. Operators began slashing spending in 2014, when oil prices plummeted, and have been slow to increase spending until the oil market stabilizes.
Rystad Energy said that 2006 was the last year in which the industry posted a reserve to replacement ratio greater than 100%. It also reported that the volume of resources per discovered field also fell in 2017. The average offshore discovery in 2012 held 150 million BOE in 2012, but totaled only 100 million BOE this year.
“Most worrisome is the fact that the reserve-replacement ratio in the current year reached only 11% compared with over 50% in 2012,” Passos said.
“Low resources per discovered field can influence its commerciality. Under our current base case price scenario, we estimate that over 1 billion BOE discovered during 2017 might never be developed,” Passos said.
The three countries with the largest discoveries in in 2017 were Senegal, Mexico, and Guyana.
In Senegal, Kosmos Energy discovered the Yakaar gas field. This year was another promising one for Mexico, which is gradually liberalizing its exploration sector by allowing more private investment. The Zama and Ixachi discoveries, together with some other smaller finds, added approximately 1 billion BOE of recoverable resources. The Zama discovery by Talos Energy was the first discovery in the country by a private company in 80 years.
In Guyana, ExxonMobil added another 1 billion BOE of recoverable resources through its 2017 large discoveries of the Payara, Turbot, and Snoek fields.