Operators are spending at a more-than-four-year high to uncover new oil and gas reserves, but the results so far have been disappointing.
Over the first half of 2023, new discoveries worldwide amounted to 2.6 billion bbls. of oil equivalent (BOE). This was 42% less than the 4.5 billion BOE in new reserves discovered in the first half of 2022, according to Norway’s Rystad Energy. With 55 discoveries this year, compared with 80 discoveries in the first six months of last year, new wells have averaged reserves of 47 million BOE, down from 57 million BOE on average last year.
This comes as spending on global exploration is expected to top $50 billion this year, which would be the highest amount since 2019. Not surprisingly, offshore accounted for 95% of the exploration spend but contributed only about two-thirds of the discovered volumes. Undaunted, offshore operators, especially those targeting ultra-deepwater prospects, are expected to increase activity this year, with a projected growth rate of 27% over 2022, Rystad estimates.
“Upstream companies are facing a period of uncertainty,” said Aatisha Mahajan, Rystad’s vice president of upstream research. “They are eager to capitalize on the increased demand for fossil fuels and find additional resources, but recent results have been lackluster.
“If exploration efforts continue to yield unimpressive results for the remainder of the year,” Mahajan said, “2023 could be a record-breaker for the wrong reasons.”
Things could turn around, though, as only 30% of anticipated 2023 exploration wells have been completed and readied for production, Rystad said. About 60% are likely to be drilled or postponed until 2024. “So, even if 2023 proves unsuccessful, a rebound could be in the cards next year,” Rystad maintains.
The South American hot spot of Guyana remains on top with 603 million BOE of newly discovered volumes already in 2023. In the deepwater Gulf of Mexico (GOM), operators continue to focus more on expanding the reserve base of existing discoveries, with the roughly 20 rigs at work largely devoted to development drilling.
The increased activity corresponds with a doubling of approved deepwater permits year-over-year. Between Jan. 1 and Aug. 13, the Bureau of Ocean Energy Management (BOEM) issued 26 new well permits for waters deeper than 4,000’, compared with 13 authorizations in the same period of 2022.
Hess and Talos Energy are among those who announced fourth quarter 2022 deepwater GOM discoveries.