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A Very Brief Overview of Oil and Gas Activity in 2018

2018 has been named the 'year of transition' for hydrocarbon exploration and production as we slowly move out of the global oil and gas downturn and into an even more optimistic forecast for 2019.
This article appeared in Vol. 15, No. 6 - 2018

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Brief Summary of Oil and Gas Activity in 2018

Global offshore exploration expenditure and number of exploration wells. Source: Rystad Energy ECube. With Brent having traded above $80 per barrel, global oil companies now hold record high cashflows, allowing them the opportunity to realign their exploration portfolios and revive the long-capped exploration outlays.

Global offshore E&A well count in 2018 has witnessed a moderate rise (5–7%) after bottoming out in 2017. Norway, Brazil, US Gulf of Mexico and Africa are contributing to the additional offshore spending in 2018. Majors, NOCs and IOCs continued to dominate the exploration successes across geographies, with some junior players like Savannah Petroleum and Quadrant Energy adding noteworthy finds this year, in Niger and Australia respectively. Global discoveries of conventional oil and natural gas are seeing good momentum in 2018, with discovered resources already passing 6 Bboe in the first three quarters, compared to 7.5 Bboe in 2017. Average monthly discovered volumes this year are estimated at 725 MMboe, up approximately 15% from 2017.

However, E&P players are currently facing a very low reserve replacement ratio, on average 10%, indicating that, regardless of signs of revival, arresting decline in the volume of new oil and gas discoveries will continue to be a major supply-related challenge for the industry long term.

High Impact Hydrocarbon Exploration 2018

Improved market conditions and operational efficiencies, along with sustained cost deflation, allowed many E&P players to move forward with promising high impact exploration campaigns in 2018. Successes include Eni’s Calypso-1 gas find offshore Cyprus, PDO’s large gas-condensate discovery at Mabrouk North East onshore Oman, Quadrant Energy’s Dorado-1 well offshore Western Australia, and Equinor’s discovery of oil at its high-profile wildcat in the pre-salt Santos Basin.

West Africa, however, saw some major disappointments this year. Tullow’s Cormorant well in the frontier Walvis Basin offshore Namibia encountered noncommercial hydrocarbons, while three wells targeting multi-million barrel resources – Lamantin (Kosmos Energy; Mauritania), Rabat Deep (Eni; Morocco) and Requin-Tigre (BP; Senegal) – were all dry. One to watch is Gazprom’s well targeting the Bautinskaya structure offshore Russia, which might yield significant reserves.

2018 Licensing Activities

The Americas witnessed momentum in licensing activities, with Brazil, Mexico and the US seeing majors, NOCs and independents competing intensely for deepwater blocks. Brazil gained almost $5 billion in aggregated signature bonus from its three deepwater bid rounds this year. In Europe, the UK and Norway saw renewed interest from a range of companies, with 212 offshore blocks awarded in 2018, compared to 103 blocks in 2017. In Asia, India’s licensing policy reforms yielded success; all 55 blocks, selected through EOIs submitted by companies, were awarded to nine domestic companies. New exploration acreages and work programme commitments from these rounds will catalyse exploration investments. Overall, amidst volatility and political uncertainties, 2018 has been a year of transformation for the exploration industry. The modest recovery of 2018 brings optimism ahead of the expected resurgence of activity in 2019.

This Regional Oil and Gas Update is brought to you by Rystad Energy.

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