Since the peak year of 2011, offshore exploration activity, measured as the number of exploration wells drilled, in the Asia-Pacific region has dropped by more than 40%.
This is very much in line with the global trend. In Australia, the number of exploration wellbores has dropped from around 90 in 2008 and 60 in 2011 down to 12 offshore exploration wellbores completed last year. The same trend has been observed in India where the number of wells drilled has gone down from a level of 60 wells per year to 32 in 2016. In comparison, offshore exploratory drilling activity in China has increased by 10–20%, and CNOOC has reported plans to drill 126 exploration wells in 2017, compared to 115 in 2016.
With the backdrop of a forecasted oil price recovery towards $97 per barrel Brent in 2021 (source: Rystad Energy Oil Market Trends Report, February 2017), and an expected 7–10% annual growth of global E&P offshore expenditure from 2018 onwards, two key questions are when and how fast will we see a resurgence of offshore exploration activity in Asia-Pacific?
As shown above, a significant increase in exploration activity is not expected before 2022 and beyond. This is partly due to a steep decline in the awarding of new exploration acreage. In the Asia-Pacific region, annual awarded acreage has fallen from more than 350,000 and 500,000 km2 in 2013 and 2014, respectively, to around 60,000 km2 in 2016. An additional observation is that discovered volumes per exploration well were reduced by 75% from 2010 to 2016, indicating that a higher degree of exploration success along with attractive, new exploration acreage is needed to ensure growth in exploration activity.
The activity level during the next three to four years will be partly driven by the drilling of prospects where activity has been postponed during the current downturn. Increased activity will, however, depend on an uptick of awarded exploration acreage to E&P companies. Outside China, Australia is likely to be one of the key countries behind increased offshore exploration activity in the region, primarily in Western Australia/North West shelf. The Great Australian Bight off Australia’s south coast could also become a growth region for exploration, but further drilling here is currently postponed until 2019 with BP’s Stromlo prospect as the first high-impact well to be drilled in the area. In the longer term, New Zealand could contribute to growth, where a risked estimate of 7 Bboe is yet to be found. The results of the deepwater Barque gas-condensate prospect in Clipper, with potential drilling in late 2018, will be a good indicator of the area’s potential.