Maxted, one of his generation’s most successful oil finders,
probed the past and future of exploration during his Michel T. Halbouty
Lecture at this year’s AAPG Annual Meeting in Dallas.
his remarks by first lauding the petroleum industry on its achievements:
should be proud to be part of this profession and this industry.
As a result of our achievements and those of our predecessors, petroleum
has provided the impetus for the economic, social, technological
and political development of the planet," Maxted told the large
crowd gathered to hear his remarks.
many feel the industry’s glory days are in the past, Maxted
said plenty of work remains for companies and professionals willing
to take on the challenges of exploration.
global liquid reserves are estimated at 1.9 trillion barrels, and
today petroleum accounts for about 60 percent of the earth’s
energy needs, a trend that will continue through about 2050, he
said, when natural gas and associated liquids will increasingly
be the fuels of choice.
oil yet to be found is estimated at 600 billion barrels, suggesting
an ultimate potential resource base of 2.5 trillion barrels,"
he said. "On this basis, 25 percent of our worldwide oil endowment
is still to be found — this is a lot of oil. Thus, the industry
still has a significant future, with the next several decades being
Of the total
oil discovered, about 850 billion barrels or 48 percent have been
produced. Production increased about 2 percent per year through
the 1990s to 28 billion barrels a year in 2000. By the end of the
last millennium, conventional oil reserves had declined to approximately
1.05 trillion barrels, at a rate of 3 percent per year.
this trend suggests global oil production will peak between 2020
and 2030, he noted.
paradigms are important here," he said:
a lot of oil has not yet been found, "we have already entered
the mature phase of our industry," he said. "Our challenge
will be to find this oil in order to defer and minimize the inevitable
decline in production capacity, which is caused by demand outpacing
may be expected to tighten and there will be a sustained higher
commodity price going forward — "and commodity price is
the overarching driver of the upstream petroleum industry,"
back at the two principal price cycles since 1973 to gain historical
perspective on the future of the petroleum industry.
an exploration perspective, there is a direct relationship between
price and the level of worldwide activity," he said. "The
phase of rising oil price during the late 1970s and early 1980s
resulted in a rapid expansion of global exploration and significant
price drop in the mid-1980s caused an immediate and precipitous
reduction in exploration activity, which characterized the subsequent
period of low oil price through the 1990s.
the price-versus-activity relationship has diverged since 2000,"
he said. "The recent commodity price increases have not yet
been followed by an increase in the level of exploration."
prices and cash flows through the 1990s caused the industry to focus
on reducing costs — "the factor primarily responsible for
reduced exploration activity," he noted.
was compounded by lower stock prices and company assets being undervalued.
those companies with strong balance sheets found it cheaper and
easier to acquire new reserves and production inorganically through
cash and/or stock transactions rather than find them organically
with the drill bit," he said.
It is during
this period that the so-called mega-mergers and super-independents
evolved, he pointed out.
merger and acquisition period of the late 1990s, acquisition budgets
increased at the expense of development and exploration budgets.
Following this period, spending increased with price, and companies
shifted to an organic strategy of exploitation with development
budgets increasing at the expense of acquisition budgets.
common denominator in both phases was depressed exploration budgets,
which have remained at about 15 percent over the last five years,
have all been impacted by this retrenchment from exploration by
the industry," he said.
to minimizing exploration, the practices of the mid-1980s has had
critical long-term consequences. Namely, the companies and people
in the E&P business have declined dramatically.
estimate shows that over 30 percent of the upstream petroleum industry
population has been lost during the last decade alone," he
numbers, its not surprising that geologists and geophysicists have
been severely affected.
demographics for the exploration population have changed,"
Maxted said. "There is a relative lack of new explorers entering
our industry — and we, the experienced geoscientists, are quickly
trends in the 1990s hold a harbinger of future exploration,"
found in giant fields of greater than 500 million barrels of oil
equivalent through the 1990s was 156 billion barrels of oil equivalent
in 77 fields. Three times more gas than oil was found, and 60 percent
of the new fields were in the Middle East.
percent of the giant fields discovered during the decade were in
deep water, and 30 percent of new oil was found in Africa.
and gas discoveries in the 1990s may be rationalized into four "business
opening" themes, he said. These include:
technology — including 3-D seismic and advances in drilling and
production, which allowed the global exploration of the Tertiary
deepwater delta systems.
geography, which provided ideological change — particularly the
opening of the former Soviet-bloc countries and the advent of
international participation in OPEC countries.
oil prices — this could lead to the reopening of former
exploration areas as well as new ones, including those in remote
interior basins of continents or offshore rift/passive margins
in high latitude regions.
gas/LNG markets — which has stimulated worldwide exploration
geology may through secondary exploration develop new plays and
fairways in established petroleum provinces or open new areas, he
other perspectives are important to recognize about exploration
in the 1990s," he said:
oil found in new giant fields during the decade was only approximately
one-third of the total discovered in the 1980s. "This continued
a prevailing trend that was established in the 1970s," he
said. "The 1960s was the peak decade for giant new discoveries
… by the 1990s the new giant oil fields represented only 25
percent of the total production."
increasing importance of fields with a stratigraphic component
to their traps. During the past 50 years, new finds with stratigraphic
traps have increased from 10 percent to almost 40 percent.
does the future of exploration hold?
"we may have entered a new era with different characteristics
relative to previous phases."
oil prices in the late 1990s will likely continue, and the industry
should plan its business on the assumption of strong, long-term
there has been a change in the relationship of oil prices, the
stock market and E&P company share prices — E&P sector
stock prices are not rising in line with recent oil prices increases,
disconnect is evident. I believe there are concerns about the potential
for profitability due to cost pressures and continued anticipation
of a price pull-back and company growth due to opportunity constraints
and reinvestment ratios.
should commodity prices remain high, and should the industry be
able to manage costs, then its future will hinge on the ability
to invest in new opportunities for reserves and production growth,"
he said. "If we successfully achieve this, then E&P stocks
should be robust.
will not be easy to achieve, he added. From a growth perspective,
reserves and production for a large number of U.S. companies have
been generally flat over the last five years and neither is expected
to increase dramatically going forward — in fact, companies will
continue to face the challenge of simply replacing reserves and
In the last
six years, industry production costs have risen by more than 30
percent from an average of $10.65 per barrel of oil equivalent to
$13.95, despite a major focus on reducing costs.
of current production may be expected to continue to rise,"
he said. "New, cheaper sources of reserves and production are
required to dilute these average total unit costs."