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Report points to 2014 as make-or-break year for deepwater projects

01st May 2014

Conventional exploration continues to be very successful, but 2014 is a make or break year for frontier deepwater exploration, according to report out today

Report points to 2014 as make-or-break year for deepwater projects
The key message from the 2014 report is that commercial success rates are being maintained at around 1 in 3 globally with a finding cost of a dollar per barrel of oil equivalent over the last five years.

UK-based Richmond Energy Partners measures annually the pulse of international conventional exploration outside North America by monitoring the performance of 40 exploration and production projects over a five-year period, together with drilling plans for 2014. Its report out today covers USD 32.5bn of exploration drilling spend over 5-years and USD 8.4bn planned spending for 2014.

Richmond Energy’s 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 message from the 2014 report is that commercial success rates are being maintained at around 1 in 3 globally with a finding cost of a dollar per barrel of oil equivalent over the last five years. 

Gas in East Africa, Israel and Australia makes up half of the 35 billion barrels of oil equivalent discovered by the companies analysed and so boost the exploration statistics. Although these gas discoveries are commercial, much of this gas will take decades to produce and monetise.  In fact, the study finds 40 per cent of recent discoveries have still not progressed to development 6 years after discovery. 

The industry faces other headwinds too.  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 per cent.  The new pre-salt play in Angola has become the key emerging play globally.

“The high cost of frontier drilling in deepwater, coupled with very little commercial success can be a company breaker, as much as a company maker.  With USD 2.9bn budgeted in 2014 for deepwater frontier wells, 2014 may be literally a make or break year for several exploration companies.

“Whilst the headline numbers are encouraging, success is concentrated in only a few geological plays and companies. At USD 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,” said Myers.

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