Westwood Insight: 2017 Exploration Highlights
After two lean years of spending cuts, 2017 brought a few genuine surprises to the exploration sector. Not a full recovery by any stretch, but enough to suggest the industry hasn't entirely lost its appetite for frontier risk.
The headline acts
ExxonMobil's continued success in Guyana stands out. The Payara and Snoek discoveries added to what is now a world-class resource base on the Stabroek Block, with gross recoverable resources climbing above 3.2 billion barrels. For a deepwater province that barely registered on most operators' radar five years ago, this is a remarkable run.
Offshore Senegal, the SNE appraisal programme confirmed a development-ready resource of around 560 million barrels. Cairn Energy and its partners moved closer to a final investment decision, though the fiscal terms and partner alignment still needed work heading into 2018.
In the Barents Sea, Lundin's Alta/Gohta complex continued to intrigue. The resource is large but the fluid characteristics remain tricky. Whether this becomes a commercial development or an expensive appraisal programme depends on answers that won't come cheaply.
What the numbers tell us
Global conventional discovered volumes in 2017 came in at approximately 7.5 billion barrels of oil equivalent, up from the cyclical low of around 6 billion boe in 2016. Still well below the 15-20 billion boe annual average of the 2008-2013 period, but a step in the right direction.
Exploration wells drilled globally fell to roughly 1,400, down from over 3,000 at the peak. The wells being drilled now are more targeted, with operators focusing on proven basins and infrastructure-led opportunities rather than true frontier plays.
The commercial success rate — discoveries that will actually get developed — hovered around 25-30%. That number masks wide variation: majors are running closer to 40%, while smaller independents are struggling below 20%.
A selective recovery
The pattern emerging is clear. Operators with strong balance sheets and existing basin positions (Exxon in Guyana, Eni in dual-exploration mode, Total in frontier West Africa) are drilling. Everyone else is waiting, farming down, or quietly exiting exploration altogether.
Spending on exploration is forecast to rise modestly in 2018, but the composition of that spending has shifted. Less wildcat, more appraisal. Less frontier, more infrastructure-led. The industry is exploring again, but it's a more cautious, commercially disciplined version of exploration than the one that preceded the downturn.
Whether that discipline holds when oil prices push past $60 is another question entirely.
Andrew Reid, Exploration Analyst, Douglas-Westwood