The last 24 months have seen exploration activity fluctuate in different regions and for different operator types. In almost all instances this is driven by funding constraints and uncertainty over future market conditions. Particularly acutely hit by these two market dynamics are regions with a predominance of independent operators, who have small asset bases from which to raise capital. This operator type is comparatively less attractive as a loan recipient when compared with larger fully integrated oil companies, who typically have both upstream and downstream assets from which to leverage finance. With the future rewards of exploration programmes uncertain, and with finance more easily attracted to projects with more immediately tangible returns, it is appraisal and development drilling, rather than exploration drilling which has become more prevalent in regions such as the Gulf of Mexico and North Sea, which have the largest numbers of independent operators.
Exploring South America
However, the global exploration picture is by no means homogenous, and decline in some of the mature offshore regions is more than countered by keynote growth and success in others. Those regions that are posting higher levels of investment tend to have either, or both, of the following characteristics; the presence of financially strong majors or national oil companies and/or an abundance of acreage, which has shown good potential. Accordingly in Latin America, nationally owned Brazilian operator Petrobras continues an aggressive exploration programme targeting the pre-salt, deepwater reserves of the Santos basin, which have thrown up some of the most significant discoveries of recent years.
Whilst in Australasia, preliminary exploration activity offshore New Zealand recently reached a 10 year peak on the back of an upsurge in purchases of seismic data. Looking across the Tasman Sea, the Browse and Carnarvon basins offshore Western Australia continue to play host to a series of major new gas discoveries, as companies such as Chevron, ExxonMobil, Shell, ConocoPhillips, Woodside and Hess are all engaged in major exploration programmes at the moment to prove up reserves sufficient to supply the new LNG liquefaction trains planned on the Western Australian mainland.
Exploring the Middle East
In the Middle East, where there is no shortage of financially empowered national oil companies, major new finds have recently been made. In particular both the Saudi Arabian and Iranian sectors of the Persian Gulf have recently returned significant discoveries, and, around the Eastern Mediterranean offshore Israel, the discovery of large gas resources at Tamar and Dalit has led to a complete revival of interest in this politically sensitive, yet promisingly underexplored area.
Far East discoveries
Yet even with the presence of a national oil company, historic examples of successful exploration and nearby energy hungry markets is not enough to guarantee continued exploration activity. In the Far East, CNOOC has commanded great resources in an attempt to discover the offshore hydrocarbon resources required to feed China’s growing industrial economy. However, despite initial success, the number and size of new discoveries in this area has not been enough to keep up with growing demand, and so China has sought to match investment dedicated to exploration in its territorial waters, with development loans which pave the way for access to proven and potential reserves from other countries, such as the recent loan of US$ 10 billion to Brazil.
On a global level, exploration activity retains its regional focus, with each area’s particular set of circumstances and drivers feeding in to how much activity we can expect to see. However, one characteristic that transcends these factors is the move towards deeper water exploration in ever harsher environments. Whether it be the mature areas like the North Sea and Gulf of Mexico regions, where high levels of shallow water exploration over many years now means that operators have been pushed into the less explored West of Shetlands and Lower Tertiary areas respectively, or the relatively unexplored waters around India, where Reliance Industries has just taken out a five year lease on Transocean’s ultra deepwater drillship Dhirubai Deepwater KG1, despite the existence of plenty of shallow water acreage. There can be no doubt that, when we emerge from global recession, the next growth phase of the offshore industry will be one where we see the cementing of the importance of deepwater exploration relative to shallow water. The challenges and rewards associated with this will be unique.
Author: Julian Callanan and Dr Roger Knight, Infield Systems Ltd.