Oil and gas exploration is back. Energy giants are hunting to replenish reserves
Executives at the CERAWeek Conference in Houston, Texas, this week declared that global energy companies have returned to the basics, focusing their efforts on finding?new oil and gas sources. This marks the end of years of underinvestment.
The'shale revolution' in the U.S. in recent years promised a flexible, abundant supply. However, growth in renewable energy sources like wind and sun raised doubts over long-term demand for oil. Oil and gas drillers have chosen to 'flood profits into dividends and stock buybacks rather than exploration.
Production?in the Permian Basin of the U.S. will plateau as energy demand continues to grow. Oil and gas producers will have to fill in the gaps left by their production over the next decade.
Finding new resources is more important than ever because of the U.S./Israeli war against Iran. The conference's executives warned that the supply shortage could last longer than expected. This makes new discoveries more important.
Energy executives and experts at CERAWeek said that acquiring reserves rather than exploring them - which is a popular strategy in recent years - would be a challenge after the large number of deals made in the past few years. This shifts the focus to geography and geology.
"Five year ago, nobody talked about the replacement. It was forgotten. "We need to think about how to replace current production in coming years", Francisco?Gea said at the conference.
Occidental CEO Vicki Holub stated during a panel discussion that the oil and gas industry is replacing less than 25 percent of its production annually. This is a drastic drop from the heydays of exploration in the 1950s through the 1970s when production was replaced over?five-fold.
A TECHNOLOGY SAVES THE DAY AND THE NEED TO SPEED
Executives said that technology is helping oil companies move faster than ever before, cutting the time between making an oil discovery and drilling their first oil.
Anders Opedal, CEO of Norway's Equinor, said in an interview that the company aims to reduce its average exploration timeline from discovery to first oil to two to three years.
Opedal stated, "We are working differently with our suppliers, we have different internal processes and approval processes." "I won't now approve one project personally at a time. I will approve 6 to 8 projects in a batch.
Exxon Mobil also places a high priority on speed. John Ardill said, Exxon’s global exploration head, that the company considers how fast it thinks it can reach first oil production before deciding whether to enter an exploratory block. Exxon aims to increase oil and gas production to 5.5 millions barrels per day in 2030.
Gordon Birrell (executive vice president for production and operations) said in an interview that BP is focusing on building up a database of discovered resources and potential development opportunities, to ensure projects are moving towards final investment decisions.
He said, "We are very disciplined about which projects we invest in and which ones we put forward first."
BP has announced 12 discoveries for 2025. These include the Bumerangue discovery in Brazil, as well as others in Egypt, the U.S. Gulf, and Brazil. It also reported findings in Namibia and Angola via its Azule Energy joint-venture with Eni.
BREAKTHROUGH DESCOVERIES ARE REQUIRED
Exxon made a significant oil discovery in Guyana in 2015. The estimated recoverable resources are at least 11 billion barrels. This is widely considered the latest major discovery. Exxon, and other majors, have been under pressure to find breakthroughs in order to compensate for a production shortage expected to occur within the next decade.
Shell is expecting a shortfall in production of between 350,000 and 800,000 barrels per day due to mature fields that are unable to reach targets. This was reported by the company, citing analysts. Shell is evaluating oil and gas projects in Venezuela, and may approve one or two of them by the end of the year if fiscal and legal conditions in Venezuela allow it. This was revealed this week by CEO Wael Sawan.
Chevron will have the lowest reserves in 10 years by 2024. Last year, the company completed its purchase of Hess. This resulted in a boost to reserves. Mike Wirth, CEO of the company, has stated that reviving exploration was a priority.
ORGANIC GROWTH IS a goal
Claudio Descalzi is the CEO of Eni, an Italian oil company, whose exploration strategies were praised by industry experts this week. Claudio Descalzi, CEO of Italian oil company Eni, said that the company plans to develop over 850,000 bpd in organic growth within the next five-year period.
Adam Blythe, Partner at Bracewell said in a statement this month: "Companies realize that this enormous reserves replacement gap cannot be solved by M&A." While new acquisitions may help, the majority of the obvious and most impactful opportunities are already in place.
Several governments are cooperating to boost exploration. Alcides André, executive board member of the National Petroleum Gas and Biofuels Agency, Angola's top producer, says that licensing rounds, which used to take up to two years, are now completed in less than six months. He said that the country intends to further'reduce this to around three months.
Oil executives often say that exploration is risky and more of an art than a science. Brazil and Namibia have been two countries where major oil companies have had difficulty making discoveries.
Alfred Stern, CEO of OMV, said in an interview this week that "everyone is refocusing on trying to do more exploration." "There is always a balance between organic exploration and non-organic, and the difference really comes down to timing and how long it takes for production to happen."
(source: Reuters)
