‘Window of opportunity to invest in exploration’

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THE current downturn may be the perfect window of opportunity to invest in exploration.
This was the verdict from a session entitled The Future of Exploration at the CERAWeek by IHS Market in Houston last week
While IHS has predicted modest growth in global exploration spend for the next three years in an industry already underinvesting, speakers at the event reportedly said a barrel half-full attitude could reap rewards in the short to mid-term future.
Gerald Kepes, IHS Markit Head of strategy and competition of upstream, said some companies had abandoned offshore and conventional exploration to focus on unconventionals in United States shale plays.
However, he said those who had decided to press on in the unconventional space may find the next five to six years becoming one of the best times in the past two decades to engage in exploration.
“The cost is substantially lower,” explained Kepes, “…less competition out there, meaning lower prices for bidding for new acreage.”
And, critically, companies can drill almost as many wells today in spite of brutal exploration budget cuts.
Total’s SVP Exploration, Kevin McLachlan was singing off the same hymn sheet, and said: “With falling prices, falling profit and budget cuts, it’s not been an easy time for any of us. We know that exploration takes a long-term view. We’ve reduced our exploration budget very dramatically to 40% compared to 2014 highs.”
The general consensus was that fossil fuels will remain the dominant energy source for decades, adding impetus to replace production and grow reserves in a limited time frame.
McLachlan said Total’s exploration strategy was focusing on conventionals in the long-term and the company expected to drill about 27 wells this year.
Half of these wells will be drilled in core and emerging basins, 25% entailing near-field exploration to boost the value of producing assets, and the remaining 25% on frontier prospects – including deepwater and ultra-deepwater – to open-up new plays.
In 2016 Total added 500mboe as a result of exploration programs by drilling 19 wells and spending US$1.4 billion.
This year the company’s budget has been reduced to US$1.25 billion, but Total was planning to increase the number of wells drilled to 27.

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