Mid-January saw Norwegian analyst Rystad Energy publish a commentary about the collapse in the volumes of hydrocarbons discovered of late.
Rystad said the 2016 total offshore discovered liquids resources tally reached slightly below 2.3billion barrels … 90% lower than in 2010.
In 2016, the average liquid content in the discovered resources was around 40%. The replacement ratio for liquids in 2016 was below 10%.
So what? Analysts routinely pump out all sorts of upstream stuff. And in any case, the exploration effort has collapsed as a result of the current oil price slump down-turn. Hasn’t it?
Just think of all those rigs parked here, there and in the Cromarty Firth, or sent to the breakers.
But then I looked at the Rystad note’s graphic and immediately became uneasy. And I read this bit with shock: “In fact, total global discovered volumes (oil & gas combined) are at an all-time low since the 1940s.”
You might think that the crash in volumes of oil found offshore worldwide might have something directly to do with the oil price, therefore drop in effort.
But look at the Rystad bar-chart herewith. The volumes found literally fall off a cliff after 2010. The crash came four years later. 2010’s the last really good year for Brazil.
And yet, most of the latest generations of very expensive semi-submersible and jack-up drilling rigs ordered on the back of the long-running oil price boom that kicked in around 2005 were delivered after 2010.
Practically all the 6th/7th generation semis delivered so far, for example, are sitting in Norwegian waters, idle. Various ultra-deepwater drillships are also lying idle elsewhere.
Will all this new drill-power available, presumably the effort to find deepwater reserves increased sharply in recent years as indeed it did.
But look at the return on that effort. Very little, it seems; even bordering on zippo. Yes, Brazil did quite well in 2011-12, Norway found Johan Sverdrup and Liza was found off Guyana in 2015.
At least Brazil had an excuse for the drop-off in volumes found because there was already so much oil in the discoveries hopper that further drilling was pointless.
As Rystad puts it: “Brazil experienced a new ‘golden age’ thanks to multi-billion barrels discoveries made in the beginning of this decade.
“Among the largest discoveries Lula (formerly known as Tupi), Libra and Buzios stand out. Combined, these hold about 20billion barrels of liquids.
“All of the large discoveries made in Brazil in the past decade are located in the large pre-salt basins, especially Santos and Campos. However, the success story from 2010 did not repeat itself as 2016 approached.
“This is due to a combination of factors such as limited capital to develop projects that were previously discovered or local content regulations, among others.”
One presumes that “among others” includes the impact of the Car Wash scandal that still echoes today and resulted in foreign flag rigs and ships being dumped off their contracts.
On balance then, it was brilliant offshore Brazil.
The same cannot be said of many other places and the UK effort bordered on appalling, not that Rystad mentioned us at all.
Highlights and lowlights for Rystad are:
Norwegian Continental Shelf exploration showed disappointing results in 2015 and 2016, with no discovery more than 100million barrels equivalent.
It is noted that since the discovery of Johan Sverdrup in 2011, there has not been another sizeable discovery made on the NCS. Exploration results were particularly discouraging given the number of exploration wells in the region, which remained relatively stable within the range of 45 to 65 exploration wells per year, since 2010.
The largest recent find is Universitetskaya, discovered in 2014. This discovery could potentially hold over 2.3billion barrels of resources, of which about 1billion barrels are liquids.
But Russia continues to be dependent on foreign technologies to be able to develop its offshore discoveries, especially in the Arctic areas.
Exploration offshore the Russian Arctic regions is on hold, in part due to less interest in the investment-heavy exploration due to low oil price.
The past five years of exploration have been positive for Angola. In 2016, there were three significant discoveries made: Golfinho (operated by Cobalt International Energy), being the only large oil discovery. Katambi and Zalophus (BP and Cobalt respectively) were the largest gas discoveries.
Exploration results were particularly encouraging in 2015, with the 1billion-barrel discovery Liza, which ranks as the biggest oil find and about 30% of the total offshore discovered liquids for that year.
Overall, Rystad expects the exploration activity to slowly pick up from next year, allowing for more discoveries towards the end of this decade and beyond.
So does that mean that the volumes of hydrocarbons likely to be encountered across the total exploration effort for 2017 and several years more will remain on a par with the 1940s when accurate data will have been like hen’s teeth.
If so, does that mean the predicted Peak Oil crunch that was so fashionable a few years ago and which famed oil & gas industry Matt Simmons became convinced about was real, really is real?
Except that the Peak Oil idea has been kicked into the long grass these past few years. After all, look at the US shale oil & gas phenomenon.
And here on the UKCS, Hurricane Energy might indeed have the last laugh with massive basement oil discoveries. These are game changers, surely?
So here we are, 70 years on from the times that Rystad refers to with what?
• A staggering amount of accumulated experience on and offshore, much of it recorded in some way
• A growing legacy of seismic data generated during the hunt for hydrocarbons and a growing portfolio of production seismic data
• An incredible increase in the stable of hardware used to drill for and produce the prize, though in many parts of the world, land rigs haven’t changed much in more than 50 years (I’m sure Mike Salter will put me right if he thinks I’m wrong)
• The relentless march of technology.
In short, the staggering firepower that Big Oil can muster today both on and offshore is light years apart from what enabled oil & gas production in the 1940s.
And so, why are we going backwards, even given the impacts of the current downturn?
I’m jiggered if I can fathom this one.
Can any of you? Convincingly?
If so do please get in touch.