Conventional oil and gas discoveries during the past three years are at the lowest levels in seven decades, and aren’t expected to recover, a new report said.
The information services firm IHS Markit attributed the slump to a drop in the number of wildcat wells targeting conventional plays, particularly during the most recent downturn.
The decline was also driven by competition from short cycle unconventional projects, and by financial investors who question long-term, high-cost, frontier projects.
Keith King, senior advisor at IHS Markit, said: “One of the main drivers here is the shift of investment by US independents from international exploration to shale opportunities in the US – shorter cycle-time projects – with greater flexibility to respond to changing market conditions.
“These operators can quickly turn an unconventional project off and stop or postpone drilling next month if oil prices fall.”
IHS also found that the average discovery size of conventional fields varies greatly with the maturity of the basins being explored, another factor contributing to the modest exploration results in recent years.
Basins that are early in their life cycle have average discovery sizes 10 times greater than average discovery sizes made in the later, more mature basins.
However, operators are still drilling fewer wells in frontier basins.
Mr King said: “The industry will likely continue to invest more in less costly, less risky, quicker cycle time projects in the onshore and shelf, with deep-water investment remaining constrained.
“There will be areas of intense activity in the deeper water depths and in frontier and emerging-phase basins as well, but overall, these areas will only see incremental gains.”