The oil and gas discoveries of the 1990s, which ranged from four to nine billion barrels each year, were significant in location but less so in size. The discoveries over the past 10 years were considerably smaller both in size and number than previous years -- and that fact has serious implications for the future.
"By 2005 discoveries from this decade will provide about 20 percent of worldwide consumption," said Robert Esser, director of Global Oil and Gas Resources with Cambridge Energy Research Associates in Cambridge, Mass.
"To meet the current annual demand of 28 billion barrels and projected annual demand of 35 billion barrels in 2010, new production must originate from a variety of sources -- including the significant discoveries of the 1990s," he said.
These other sources, according to Esser, include the recent trend toward increased annual discovery rates as well as pre-1990 discoveries made economic and accessible with new technology or through political opening or privatization in such countries as Algeria, the Former Soviet Union, Brazil and Argentina.
"Increased recovery rates from existing fields will be another important source of future production," he said, as will development of the massive extra heavy oil reserves in western Canada and the Orinoco oil belt of Venezuela.
"One of the strategies of the early 1990s was a shift in emphasis toward natural gas-related exploration to meet increasing natural gas demand," he said, "but also to supply gas for the surging liquefied natural gas business -- resulting in the strong growth in gas-related liquids."
Esser will present a paper titled "Giant Discoveries of the 1990s: Were They Significant?" to the Pratt II Conference, set Jan. 11-15 in San Diego.
He said the current world liquid productive capacity is about 79 million barrels, up from 73 million barrels per day in 1995. Projections for 2010 indicate productive capacity of about 97 million barrels a day -- a significant increase that the world's oil industry must develop.
However, before the industry can look forward to future activity and discoveries it must look back at the last decade and recognize its impact on the coming years, he said.
"The 1990s were characterized by a boom-bust environment," he said. "In 1990 Kuwait was invaded and that country's production was lost for a considerable amount of time. Saudi Arabia and other nations increased their capacities to pick up the slack, but this increased production in the Middle East and efforts to increase production in other countries eroded oil prices in the early 1990s, prompting companies to reduce exploration and development activities."
However, in the mid-1990s a surge in demand reversed this price decline -- and the industry experienced a surge in E&P activity, leading to fears of both rig and personnel shortages in 1997.
"But in mid-1997," Esser said, "a sudden collapse of the Asian economies and record warm winters in the Northern Hemisphere brought about a price collapse that prompted companies to dramatically reduce activity worldwide."
As a result of this price decline, "merger mania enveloped the industry, which also reduced E&P operations."
The one arena that continued to thrive throughout this downturn was exploration and development in very deep water, especially in the Gulf of Mexico, where the deep water oil fields have considerable associated gas -- a resource the country needs to meet demand.
"1999 continued the boom-bust environment," Esser said, "as prices doubled due primarily to curtailment."
This was "an artificial price support," he added, "and companies recognized this and continue to be hesitant to substantially increase their level of activity.
"Despite this slowdown, the size and pace of discoveries has increased in the later years of the 1990s, with 1999 emerging as the peak year for discoveries in the decade," he said.
"And we expect that activity to continue to grow."
The dominant discovery pattern of the 1990s was the evolution of the deep water as the primary exploration target.
This was evident in the Gulf of Mexico, West Africa -- especially Angola and Nigeria -- and Brazil.
Esser said another characteristic of activity in the 1990s was the shift in exploration emphasis to gas, including LNG. This trend was most evident in Southeast Asia.
Since the mid-1990s, the pace and size of significant discoveries has increased steadily.
There were nine giant oil discoveries in the past decade, Esser said, "each with over one billion barrels of reserves."
- The Crazy Horse discovery in the Gulf of Mexico.
- The Roncador and Barracuda fields in Brazil.
- The Azadegan discovery in Iran.
- The Cusiana Field in Colombia.
- The Girassol and Dalia discoveries in Angola.
- The Oughroud discovery in Algeria.
- The Sihil discovery, underlying the Cantarell Field in Mexico.
Twelve giant gas fields, each with more than five trillion cubic feet of reserves, were discovered over the last 10 years, he continued. Among these were the Shtokmanovskoye and Rusanovskoye fields in the offshore northern reaches of Russia, and the 1999 discovery at the Shak Deniz prospect in the Azerbaijani portion of the Caspian Sea.
Other giant gas discoveries exceeding five trillion cubic feet include:
o The 1999 Itau-San Alberto discovery in Bolivia.
- Orman Lange in Norway.
- Sahil Rawl in Oman.
- Yadana in Myanmar.
- Peciko and the Wiriagar Complex in Indonesia.
- Hides in Papua New Guinea.
- Perseus and Evans Shoal on Australia's Northwest Shelf.
The 1990s yielded clusters of discoveries in several regions of the world -- and the three most important clusters were all in deep water: the Gulf of Mexico, offshore Angola and offshore Brazil.
1990s discoveries in Angola and the Gulf of Mexico each totaled about seven billion barrels of oil, and new fields in Brazil yielded almost six billion barrels.
"There were other regions of significant discoveries," he said. These include:
- Algeria's Berkine Basin, where three billion barrels have been found.
- Iran, where new discoveries may exceed three billion barrels.
- Colombia, where the Cusiana-Cupiagua fields account for reserves exceeding two billion barrels.
- New gas fields also were found in clusters, primarily in the Gulf of Mexico, the Norwegian Sea, the northwest shelf of Australia, Indonesia and, most recently in 1999, Bolivia.
- A second tier of gas discovery clusters have been found in Trinidad and the Nile Delta in Egypt.
As for world discovery totals for the 1990s, Africa and the Middle East lead all other regions for oil discoveries with 28 billion barrels.
Southeast Asia leads with gas discoveries exceeding 180 to 200 trillion cubic feet (Figure 1).
"We expect discoveries in the next 10 years to continue the trend of the late 1990s and increase in pace and size," Esser said.
"We estimate annual discovery rates will increase from the four to seven billion barrels a year pace of the early- to mid-'90s to seven to 10 billion barrels annually going into the new century."
Esser said that since the mid-1990s the number of significant discoveries -- those greater than 100 million barrels or one trillion cubic feet of gas -- increased from 32 in 1996, to 40 in 1998 and 44 through last November.
Areas with the most discoveries include the Gulf of Mexico, Angola, Nigeria, Norway, Algeria and Egypt (Figure 2).
"The primary reason for these gains will be the change in exploration venue -- we are exploring where the prospects are larger," he said.
"Also, we will see increased availability of drilling equipment capable of drilling in 5,000-10,000 feet of water depths, and the opening of areas such as Brazil that traditionally have been closed to outside operators."
Esser also expects the merger-related slowdown in E&P activity to reverse itself in the next couple of years, "and we will see the super majors increasing for exploration and development activity."
Another important development for the future is the slow opening of Middle Eastern countries to western investment.
"The Middle East is where considerable undiscovered potential lies -- and also where opportunities to develop previously discovered fields exist, especially in Iraq," Esser said.
The opening will be slow, he added, and may be pointed toward gas rather than oil in Saudi Arabia initially -- "but at some point the burden that is going to be placed on the Middle East to supply the increasing worldwide demand will require considerable Western involvement in the future."
Significant regions for undiscovered oil potential include:
- The Middle East.
- Latin America.
- Eurasia, which includes both Russia and the overall Caspian Sea area.
A second tier of regions with substantial undiscovered oil are:
- North America -- particularly Canada.
- Africa -- both the northern tier and western offshore.
- The Far East.
Major regions of undiscovered gas potential are led by Eurasia, followed by the Middle East, North America, the Far East, Latin America and Africa.
"Undiscovered oil potential is estimated to be 610 billion barrels," he said. "But it is important to note that the discovered reserves of unconventional extra heavy oil from western Canada and the Orinoco Oil Belt of Venezuela are close to 700 billion barrels.
"We know this oil can be economically produced at current prices, and this resource exceeds the projection of undiscovered conventional oil."
This means that extra heavy oil will be "an increasingly important source of new production as we go into the next century," Esser added.
"We project production from extra heavy oil sources to be over two million barrels a day by 2010 and seven million daily by 2020 -- from western Canada and Venezuela."
Exploration and Development Hotspots
Exploration activity in the next 10 years will continue to be led by deep water regions around the world.
West Africa, Brazil and the Gulf of Mexico will continue to lead the way, Esser said, but Mexico, which has not begun to explore its deep water Gulf of Mexico potential, could be an important new source in the coming years.
The Caspian Sea area will be a key exploration province as well.
"Continued development of the giant Tengiz Field in Kazakhstan, as well as the development on the Azeri megastructure in Azerbaijan will result in production of 1.5 million barrels of oil a day by 2010."
"It's no surprise then that this year's most significant wildcat was drilled on the Shak Deniz prospect in the Azerbaijani portion of the Caspian Sea," he continued. "While the well was disappointing to participants hoping for a significant oil discovery, it resulted in a very large gas and condensate discovery."
Esser said that the most important well drilling in the world today is the Kashagan East wildcat well in the northern Caspian Sea, directly offshore from the Tengiz Field.
"The well is looking for a Tengiz look-alike, and will have considerable implications for the actual construction of a proposed pipeline between Baku and Ceyhan, Turkey. Without a major oil discovery at this well, threshold reserves might not be reached and the pipeline project could be postponed or scrapped, which would be a blow to oil development in the region."
Additional exploration hotspots for the coming decade include:
- Eastern Canada, with continued development around Hibernia and Terra Nova fields, and new exploration in the deep water off Grand Banks.
- Algeria, where recent discoveries will fuel additional exploration in a country still largely unexplored.
- Iran, with redevelopment of many war-ravaged offshore fields.
Natural gas exploration and development activity will center around:
- Qatar and Iran.
- The Sable Island area off eastern Canada.
- Nigeria, where LNG is becoming an increasingly important export.
- The Northwest Shelf of Australia.
- Several Southeast Asian countries.
Natural Gas Outlook
Significant growth in oil production to 2010 and beyond is projected to take place in:
- The Middle East -- especially Saudi Arabia, Iraq and Kuwait.
- Eurasia -- especially in the Caspian Sea area and Russia.
- Latin America -- especially in Venezuela, Mexico and Brazil.
- Africa -- especially in Algeria, Angola and Nigeria.
Natural gas will continue to grow in importance in the coming years, Esser predicts.
"Natural gas has and will continue to provide increasing exploration and development activity," he said, with the development of pre-1990 discoveries -- such as the super-giant North Field in Qatar and other giant fields in Iran -- being the source needed to meet surging demand.
Also, LNG supplies will continue to increase, especially as demand becomes clearer in India and China, and as the worldwide spot market continues to expand.
"In 1999 large amounts of LNG have been contracted to come to the United States to help meet winter demand," he said, "in a period of tight domestic supplies. Re-gasification facilities that have been closed for years are in various stages of reopening and expansion."
It's interesting, Esser said, to look at the contributions of 1990s discoveries with regard to how they will impact worldwide production after 2000.
"About 60 billion barrels of oil were discovered in the last 10 years, and those new reserves are projected to add about 17 million barrels of oil a day to worldwide production -- about 20 percent of the projected demand for 2005 of 85 million barrels a day.
"Obviously, these discoveries won't be enough to have a major impact, and the world will have to look to other sources," Esser said, "including pre-1990s discoveries and extra heavy oil.
"In addition, production of gas-related liquids is projected to increase from eight million barrels per day in 1995 to as much as 11 million barrels a day in 2000 and 16 million by 2010," he said. "This will be a very important and large source of new production in the next decade.
"The giants of the 1990s were significant in that they traced the opening of the deep water as a primary source of new production," he said, "and will dominate the exploration in the future. Political openings and privatization efforts have provided a second source of new production. The trend toward increased discovery rates is expected to continue beyond 2000, augmenting the discovery record of the 1990s."
But, a warning.
"Industry must not relent in its search for new sources of petroleum," he said, "while continuing to develop the capability to coax more oil out of existing fields."