- Oil and gas firms are focusing on infrastructure-led exploration (ILX) near existing fields to reduce costs and shorten development timelines.
- Spending on exploration remains subdued, holding steady at $50–60 billion annually since 2016.
- Companies prioritize smaller, quicker-return projects over high-risk frontier plays.
Oil and gas companies are looking to get the most bang for their buck in exploring for hydrocarbon resources.
Those lucky enough to have made an early bet on what are now the huge frontier plays, such as Guyana, are seeing exploration expenditures and efforts pay off with large oil and gas discoveries.
All others are looking to make the best out of existing infrastructure and explore and drill in well-developed areas close to producing fields and platforms to take advantage of the lower costs for exploration and development.
Since conventional exploration spending tumbled with the oil price crash a decade ago, spending on exploration has remained about $50-60 billion per year, down from a record high of $117 billion in 2013, according to estimates by Rystad Energy.
Since 2016, exploration expenditures haven’t seen major rebounds as the industry gets leaner and wants quick returns from the assets.
For most international majors, ‘smaller and lower’ are the drivers of exploration—smaller budgets amid persistent volatility and frequent slumps in oil prices, lower lead times from discovery to production, and lower overall costs for drilling in areas adjacent to existing infrastructure and later hooking up potential discoveries to said infrastructure.
True, discoveries are smaller than in the frontier plays, but the lower exploration and development costs still make project economics work and fields close to producing infrastructure profitable.
So far, this infrastructure-led exploration (ILX) has worked, and the discovery success rate has exceeded the overall global exploration rate by 10 percentage points. Of the nearly 900 ILX wildcat wells drilled in the past five years, exploration success was achieved in 42% of cases, compared to a global exploration success rate of 32%, per Rystad Energy’s estimates.
“With strong success rates and substantial resource additions, ILX drilling is vital for sustaining production and maximizing infrastructure use,” said Aatisha Mahajan, Vice President, Exploration Research, Rystad Energy.
“As the industry adapts, ILX remains a key driver of upstream exploration, enhancing efficiency and unlocking new reserves.”
Nowhere is this strategy more evident than in the developed areas offshore Norway, where Equinor and its partners in various exploration licenses have centered their drilling efforts on prospects adjacent to platforms in production.
Just last month, Equinor announced a new gas and condensate discovery in the Norwegian Sea. The important thing for the explorers is that the discovery was made in a well-developed area in the Norwegian Sea, Åsgard and Kristin. The new find is just north of Linnorm, the largest gas discovery on the Norwegian continental shelf (NCS) that has yet to be developed.
“This discovery was made in an area where gas infrastructure is already in place, and which we’re also continuing to develop,” said Grete Haaland, Equinor’s senior vice president for Exploration & Production North.
When Equinor started up the huge Johan Castberg oilfield in the Barents Sea last month, its executives said that the project would create more opportunities in this area in the Arctic. Equinor has identified options to add 250-550 million new recoverable barrels that can be developed and produced over Johan Castberg.
Southeast Asia is another area where the majors are developing more resources using infrastructure already in place.
Shell started up oil production in March from the next development phase of a deepwater oil project offshore Malaysia, with oil flowing to the existing Gumusut-Kakap Semi-submersible Floating Production System.
For its part, Malaysian national oil company Petronas seeks to tap more resources in the mature Malay Basin off the coast of Peninsular Malaysia. The Malay Basin has pumped over nine billion barrels of oil equivalent since production began in the 1970s, while recent new discoveries highlight the basin’s continued potential, the company said earlier this year.
By Tsvetana Paraskova for Oilprice.com
Energy News Beat