Where are the best opportunities in the future for exploration investment?
The central question about where to look, where to drill, which area of the world holds the greatest promise, in terms of profits, the rule going forward may very well be: “When you go low, you go high.”
That’s according to Brian Lidsky, senior director of market intelligence for Drillinginfo in Houston.
“The most promising exploration target globally continues to be deepwater,” he said, noting that, “Taking a trek around the world, there are a lot of bid rounds open or planned.”
We begin in West Africa, generally, and Angola, specifically, as an area primed for materially higher oil production.
“Nigeria could also have a global impact, but for political reasons is likely to be years away,” he said.
In the continent, he also sees interest in current production levels include upcoming Gabon and Congo rounds.
“In East Africa, Anadarko made its first discovery offshore Mozambique in 2010 in the deepwater Rovuma Basin.”
Presently Anadarko and its partners have discovered about 75 trillion cubic feet of gas there.
“This resource is underpinning initial plans for a two-train LNG facility onshore Mozambique with initial scope for delivering 13 metric tons per annum and expandable to 50 mtpa. Final investment decision is slated for first half 2019.”
But the jewel in the African crown may be to the North and the East.
“In the coming year, Egypt in north Africa is likely the most important country to watch for 2019.”
Across the ocean in South America, Lidsky is particularly interested in Brazil and its implementation of a permanent offer round. He said it’s like a continuous bid round that pre-qualifies companies within set minimum predefined work areas for any areas not considered strategic or pre-salt.
“This certainly still covers a lot of ground and presents new opportunities from a competitive perspective.”
The pre-salt Libra discovery, incidentally, in 2010 was brought online a year ago with recoverable reserves are pegged on the order of 15 billion barrels.
“Currently,” he said, “there are 19 companies approved to bid on these assets, out of 34 who have applied, and new blocks are being added, including nine in the Campos Basin.”
Brazil has also seen some the largest purchases of discoveries by the world’s major oil companies, including purchases by Equinor, Petrobras, and Exxon.
Outside of Brazil and Guyana, Uruguay and Peru look to have what Lidsky calls “some quite interesting exploration areas coming available.” What also makes these two countries attractive is that they both have strong and stable fiscal regimes.
More recently, offshore Guyana, Exxon, which made its first discovery on the Liza oilfield in 2015, recently increased its recoverable reserves to over 5 billion barrels of oil equivalent and is targeting 750,000 BOE per day by 2025 from at least five floating production and offloading vessels.
Faster, Cheaper, Better
Across the globe, Lidsky sees the overall effects of technology on exploration, obviously, but also its imprint on the methodology that gets us there.
“Over the past decade, the continuum of advancements in data processing (particularly seismic processing and imaging) combined with other technological and engineering advancements have lowered both the cost and timeframe from discovery to production which opens up many more opportunities around the world,” he said.
Additionally, the industry has shortened the cycle time from discovery to first gas or first oil. Lidsky gives as an example the floating LNG facilities which allow for cycle times to first gas of less than 10 years.
“On the oil side, an example of fast track development is the 3 billion barrel Jubilee field, offshore Ghana which was discovered in 2007 by Kosmos Energy and reached first production in 2010,” he said.
The Politics of Deepwater
Politics, of course, plays a role in any exploration, but at the moment it seems that all political attention is offshore.
“We are seeing more, not less, countries opening up their offshore waters to exploration,” Lidsky said, which means the socio-economic-political environmental constraints are becoming all the more important to today’s explorationists.
“Deepwater exploration targets are multibillion dollar and multidecade long projects. Any snafus in the above-ground risk environment have long-term implications – not the least of which is any recent history of expropriation of assets. Countries with a long history of stable fiscal regimes are much more competitive in drawing the exploration dollars of the world,” he explained.
In 2017 (excluding the United States) there were 146 deepwater blocks awarded across the globe. Regionally, western Europe led the list with 50, followed by west Africa (18), Australasia (16) and Mexico (12).
In 2018 the number has jumped to 378 due largely to a successful bidding round in Norway that let 182 blocks with the Barents Sea taking the largest share of this with 39 blocks. Looking out to 2020, there are 605 deepwater blocks planned to be offered (excluding Faroe Islands, Mexico and United States).
Lidsky said, comparing the availability of licensing today in all regions of the world, compared to previous times, while the factors may have stayed the same, the stakes are higher.
This is complex, difficult and volatile thing to measure and Lidsky said his company, Drillinginfo, “Maintains a global network of scouts and industry professionals who continuously monitor and gather activity from countries and companies.”
“In the global explorationists’s eyes, attractive countries certainly include the United States, Norway, Brazil, Australia and certain areas in Africa,” he said. “Frontier exploration certainly follows infrastructure, so countries with a long history of E&P with frontier opportunities will certainly rank towards the top of the list.”