The global oil and gas exploration sector got the strongest boost in 2022, the most of its kind in more than a decade, resulting from new discoveries, says Wood Mackenzie, a Verisk Analytics business conglomerate, known for commercial intelligence reporting for the world’s natural resources sector. It further reported that value creation reached US$33billion at base price, with full-circle returns of 22%, at $US60/barrel Brent prices, driven by major oil discoveries in Namibia, Brazil and Algeria.
Stating in its 2022 oil and gas exploration review, Wood Mackenzie said that exploration wells were less than half the numbers during pre-pandemic years, yet the total volume of 20 billion barrels of oil equivalent matched the average annual volumes of 2013-2019.
“2022 was a standout year for exploration,” said Julie Wilson, Director of global exploration research at Wood Mackenzie. “Volumes were good, but not stellar. However, explorers were able to drive very high value through strategic selection and focusing on the best and largest prospects. The discoveries bring higher-quality hydrocarbons into companies’ portfolios, allowing them to reduce carbon by displacing less advantaged oil and gas supplies while also meeting the world’s energy needs.”
Wilson added, “The highest value came from world-class discoveries in a new deepwater play in Namibia, as well as resource additions in Algeria and several new deepwater discoveries in Guyana and Brazil, where the latest wave of pre-salt exploration finally met with success. The average discovery last year was over 150 million barrels of oil equivalent, more than double the average of the previous decade.
Liquids accounted for 60% of new resources discovered, according to the report, the third time in 20 years that liquids made up the majority of new discoveries.
“There is a lot of uncertainty in future long-term demand scenarios for oil,” said Wilson. “Explorers are accelerating oil exploration to meet near and mid-term demand, while gas exploration was focused in geographies that can supply the gas-hungry European market. In some cases, major leases are approaching expiration of the exploration term and companies are pushing to optimize their value.
“By 2030, fast-tracked development of these new discoveries could deliver 1 million barrels per day in oil and 0.5 million barrels of equivalent per day gas production, generating $US15B in free cash flow.”
It will not be premature to believe that the exploration sector will continue to be dominated by national oil companies (NOCs) and Majors, with TotalEnergies, QatarEnergy and Petrobras leading the way in net-new discovered resources in 2022, with NOCs and Majors accounting for almost three quarters of new resources discovered.
Wilson said, “Overall, we saw a year of continued discipline from explorers with exploration and appraisal well numbers largely flat from 2021. However, spend per well increased due to inflationary pressures. Appraisal well numbers increased as companies push towards final investment decisions in this short-term window of opportunity.”