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Finding New Exploration Provinces 20th September 2016 The Geological Society, London
Over the past 2-5 years a number of new promising basins have opened up.
Barents Sea
Eastern Canada
Eastern Mediterranean NW Africa
NE Latin America
Onshore East Africa
Offshore East Africa
Key Oil Gas
Copyright © 2016 by StrategicFit. All rights reserved.
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Higher oil prices have lead to significant discoveries, but the recent drop in oil price has seen a marked reduction. 125 Iara WTI Crude Oil Price ($/bbl)*
Golfinho/Atum
Jupiter
100
SNE field Lula Sugar Loaf Leviathan
75 Kish
Libra Mamba Johan Sverdrup
Galkynysh
50
Liza
Kashagan Tiber
Zohr
Azadegan
25
Key 5 Bboe recoverable reserves
Shah Deniz
0 1998
2000
2002
2004
2006
2008
2010
Year Copyright © 2016 by StrategicFit. All rights reserved.
2012
2014
2016
* Adjusted for inflation to March 2015 3
Despite cost reductions, not all frontier basins are viable at the current price
Barents Sea
Eastern Canada
Eastern Mediterranean NW Africa
NE Latin America
< $30 $30-$50 $50-70
> $70
Onshore East Africa
Offshore East Africa “70% of pre-FID oil projects are commercial at $60/bbl” - WoodMac (July16)
Copyright © 2016 by StrategicFit. All rights reserved.
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High exploration and development capex didn’t deliver the reserves or production growth IOCs were targeting. Production growth targets vs. production delivered
• In 2010 IOC set ambitious growth targets, (see chart) but: •
Exploration success fell short, sharply increasing finding costs
•
Increasing size and complexity saw project cost overruns and delays
•
Companies missed production targets by 1.9mmboe/d
(annual %)
• In 2015/16, 5 of the 7 companies set targets to sustain or grow production, but: •
Capital budgets have been reduced by 4050%, but costs are only down ~25%
•
Only 2.8 Bn barrels were discovered in 2015, the lowest annual volume since 1954
•
Frontier exploration has virtually stopped!
• Something has to change for these new targets to be met in a low price environment- but does Exploration have a role?
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Targets set over different periods across different companies, actuals are for the period 2010-14 2 Target given to 2107 3 No time horizon given for target Source: http://www.strategicfit.co.uk/strategy/cost-cutting-not-enough-to-hit-ioc-growth-target/
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What does the industry need to make frontier exploration attractive? Where next for exploration? • More exploration in proven basins vs new technology in new basins? • More value has come from mature basins in the past
• How do we keep skills in exploration? • Avoid a repeat of demographic gap created by low activity in late 80-90s What can the industry do? Level of control for E&P companies
• Change working practices to reduce costs and improve efficiency? •
Further collaboration between companies and suppliers to drive improvement in efficiency
• Breakthrough technologies to fundamentally change commerciality of frontier resources •
Eg Ultra-deep water, harsh environments, deep/tight reservoirs, heavy oil
What can governments do? Incentives for exploration drilling Make more data available Increase licence flexibility Direct NOC activity in frontier areas
-
Tax breaks (Norway ) Seismic studies over certain areas (UK) Licence options, Irish Sea & Integrated EP contracts (Mexico) NNPC drilling in Chad basin (Nigeria)
At the present rate of exploration investment & discoveries a shortfall in supply will occur within the next 10 years Copyright © 2016 by StrategicFit. All rights reserved.
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