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Aug. 1 (UPI) — Although spending on oil and gas exploration is projected to exceed pre-pandemic levels, a recent report from Norwegian consulting group Rystad Energy highlights the lack of significant discoveries in the industry.
In its findings, Rystad revealed that the six major global energy companies – BP, Chevron, Eni, Shell, and TotalEnergies – have allocated approximately $7 billion to exploration this year, a 10% increase compared to the previous year.
With concerns about a potential shortage in oil supply due to production restraints from Saudi Arabia, Rystad believes that the increase in spending will lead to a surge of activity in the upstream sector, which focuses on exploration and production in the industry.
“Our forecasts indicate that the major companies will contribute around 14% of the total global exploration spending in the upcoming months, highlighting their significant role in an industry that has shifted its focus to offshore and frontier regions,” stated the report.
Despite the industry’s emphasis on offshore reserves, this focus has not resulted in a corresponding rise in discoveries. Rystad estimates that upstream activity has only yielded 2.6 billion barrels of oil equivalent reserves in the first half of this year, representing a 42% decrease compared to the same period last year.
Second-quarter reports indicate that companies struggled under the low-price scenario that prevailed earlier this year. Legacy assets, like those held by Shell, are not expected to see significant growth beyond the levels seen at the start of the year.
In terms of new developments, Rystad reported 55 discoveries in the first half of the year, compared to 80 in the same period of 2022.
“If exploration efforts continue to yield unimpressive results for the remainder of the year, 2023 could potentially be a record-breaking year for all the wrong reasons,” warned Aatisha Mahajan, Vice President of Upstream Research at Rystad.
Most exploration efforts have targeted deepwater offshore reserves, yet companies have little to show for their endeavors thus far. Rystad provided limited explanation for this downturn, suggesting that capital discipline may be partly to blame.
“The exploration and production industry is going through a transitional period, with many companies exercising caution and shifting their strategies to focus on more profitable and geologically better-understood regions,” the report stated. “This strategic shift, along with the failure of certain high-potential wells, is contributing to the sharp decline in new discoveries.”
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