Monday 13 January 2020

While topics like the Energy Transition may have dominated the news agenda the impact on exploration drilling is yet to become apparent. The global high impact well count in 91 wells was up by 36% from 2018. The spending was flat at $3.5 billion, however, the average cost in wells fell. What's more discovered commercial volume was the highest since 2015 at around 13 billion barrels of oil equivalent (boe). The success rate was at 10 year high of 32%. This level looks to be sustained through 2020.

Over 75% of the 13bn discovered was gas. The biggest oil discoveries were both in Stabroek in Guyana, which at 6 bn barrels and counting, is one of the most prolific oil licences ever issued.

In 2019 North-West Europe topped the charts for high impact drilling globally. However, this was impressive given the maturity of wells in the UK and Norway. Unfortunately, of the 27 well programme discoveries, only two were hight impact wells - only a 7% success rate.

Guyana again topped the oil discovery chart in 2019 with the Liza field coming onstream in December and another billion barrels added in the Exxon operated Stabroek licence with some more gas also. However, there were some issues with the Tullow operated JV made two play opening discoveries that first sounded promising but turned out to be heavy and sour, contributing to a dramatic fall from grace for Tullow with its share price crashing.

The issues are the oil discovered and the planned development is more than the economy of Guyana can handle and the pace may have to slow 2020 if Guyana is to cope.

Mexico is set to be a country to watch in 2020. After a disappointing 2019, with 5 high impact exploration wells completed by international oil companies in 2019 failed to deliver a commercial discovery (with one still drilling). in 2020 it will be apparent whether Mexico can deliver the expected bounty that IOC's hoped for with at least 10 wells by seven different IOCs testing over 2.5 billion barrels of unrisked prospective volume in a range of frontier and emerging play.

In Brazil, there is a lot planned for 2020. There is with one high impact well currently drilling and seven wells planned for 2020 in recently awarded licences testing 6 billion barrels of unrisked volume in pre-salt plays in the Santos and Campos basins, and the Ceara B. Coupled with The much anticipated Peroba well drilled in 2019 by BP, for which a $598 million signature bonus was paid in the 2017 bid round, is understood to have found high CO2 content gas and is considered non-commercial.

Africa's high impact was a little subdued with 14 wells in 2019 on the positive commercial success rates were high at 57% with over 3 billion boe discovered of which ~80% was gas. One frontier opening gas condensate in South Africa as well as high impact discoveries in five countries. In 2020, a similar number of high impact wells are expected to be spread across 10 countries with potentially six frontier play tests in Guinea Bissau, Kenya, Namibia and Gabon. Also, Total is testing a new play concept at a well in Block 48, Congo Basin Angola, notable for being the deepest water exploration well ever at over 3600m.

One of the emerging markets the East Mediterranean there were six wells drilled and two commercial discoveries delivering 5 tcf. Three of the six wells were drilled by TPAO, two of which were in the Cyprus area and were political rather than technical tests. Five wells testing 16 tcf of gas are planned in 2020 including Total’s Byblos-1 well offshore Lebanon.

Australasia is set to quick up after a quiet 2019. In 2020 high impact drilling is mainly about gas with wells planned in Australia, New Zealand, PNG and Timor Leste testing over 10 tcf of gas most of which are testing frontier play.

In 2020 on current plans it seems high impact drilling will be at a similar level in 2020 with a shift of focus to North and South America. Westwood has estimated that industry drilling plans are weighted 70/30 oil to gas. The four most active companies in 2020 are expected to be the European Supermajors Total, Equinor, Shell and ENI, each participating in 14 or more high impact wells. Whilst there has been much talk about the energy transition in 2019, there is little sign of its impact on exploration plans for 2020.

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