Conventional exploration continues to be very successful, but 2014 is a make or break year for frontier deep water exploration, according to analysts.
Richmond Energy Partners measures annually the pulse of international conventional exploration outside North America by monitoring the performance of 40 exploration and production firms over a five-year period, together with drilling plans for 2014.
Its latest study covers US$32.5 billion of exploration drilling spend over five years and $8.4 billion planned spending for 2014.
Managing Partner Keith Myers said: "Exploration for conventional oil and gas is alive and well and continues to be very successful for selected companies. There is no shortage of commercial discoveries being made. 2013 was the best year for oil discoveries for five years."
The key messages from the 2014 report are that commercial success rates are being maintained at around one in three globally, with a finding cost of $1/boe over the last five years.
Gas in East Africa, Israel and Australia makes up half of the 35 billion boe discovered by the companies analyzed and so boost the exploration statistics. Although these gas discoveries are commercial, much of this gas will take decades to produce and monetize.
In fact, the study finds 40% of recent discoveries have still not progressed to development six years after discovery.
"The industry faces other headwinds too," says Richmond. "Key plays in East Africa and Iraq are maturing rapidly and delivering smaller discoveries. In addition, the dramatic increase in spending on frontier drilling in recent years has been largely disappointing, with a success rate of less than 10%. The new pre-salt play in Angola has become the key emerging play globally."
The high cost of frontier drilling in deep water, coupled with very little commercial success can be a company breaker, as much as a company maker. With $2.9 billion budgeted in 2014 for deep-water frontier wells, 2014 may be literally a make or break year for several exploration companies.
Richmond Energy Partners' managing partner Keith Myers said: "Whilst the headline numbers are encouraging, success is concentrated in only a few geological plays and companies. At $100m average cost per well, industry exploration performance in frontier deep-water plays in particular has simply not been good enough recently. There is great pressure to deliver in 2014."