In 2015, endeavors in oil exploration uncovered merely a tenth of the amount of oil usually found on average each year since 1960. Following this trend, 2016 will probably discover an even smaller amount and the possibility is sparking worry about meeting demand in the future.
Since the price collapse a couple years back, oil prices have been halved causing exploration budgets to be cut back significantly. A lowly 2.7 billion barrels was discovered in 2015, the smallest find on record since 1947 says Wood Mackenzie, a consulting firm. As of the end of July 2016, only 736 million barrels of crude has been discovered. The Energy Information Administration predicts that demand will soar from 94.8 million barrels per day in 2016 to 105.3 million barrels per day in 2026 which makes the downward trend in discovery even more concerning.
Previously, the boom in U.S. shale was thought to have the potential to make up for the loss, but with prices steady beneath $50 per barrel, the hope for any growth there has been diminished. Nils-Henrik Bjurstroem, senior project manager at Rystad Energy of Oslo, remarked that conventional drilling discoveries are at an all-time low adding, “There will definitely be a strong impact on oil and gas supply, and especially oil.”
Inventories across the globe have managed to stay afloat thanks to output from OPEC and Russia. They have pushed out more inventory in spite of lowered prices as they uphold market share. Bjurstroem said that years of under-investment, however, could be evident as early as 2025. He also said that production companies will exchange just over one in twenty of the barrels used up in 2016.
Andrew Latham, VP of global exploration at Wood Mackenzie, said that the amount of spending on exploration has been cut considerably throughout the world. From seismic studies to drilling, exploration expenses have dropped from roughly $100 billion in 2014 to just $40 billion in 2016. As for the future, Latham predicts that spending will probably stay at the same levels through 2018. In the past, Latham added, exploration accounted for 18 percent of spending within the industry. But this year, it will account for just 13 percent of spending.
Due to the slump in spending, there will be less drilling completed. According to Wood Mackenzie, 1,167 wells were drilled in 2014 and the following year, just 680 were drilled. As of August, only 209 wells have been drilled for the year of 2016. Compare this to data that calculates an average of 1,500 wells drilled annually since 1960.
Eldar Saere, CEO of Statoil said in an interview at a conference Monday, “Exploration activity is among the easiest things to regulate, to take up and down,” he continued, “It’s not necessarily the right way to think. We need to keep a long-term perspective and maintain exploration activity through downturns as well, and Statoil has.” At the same conference on Tuesday, exploration head of Statoil, Tim Dodson said that the company will drill “a significant” number of wells over the next few years in the Barents Sea. According to Dodson, the levels of investment now and he dropping rates at existing fields could cause a supply gap by 2040.
Another attendee of the conference was Ben Van Beurden, CEO of Royal Dutch Shell PLC. Van Beurden expressed that companies across the industry would need to invest roughly $1 trillion per year to meet demand. He predicts that demand will continue to grow by 1 to 1.5 million barrels per day with nearly 5 percent of supply wasted due to natural declines annually.
By Briana Steptoe.