Oil Discoveries Are Down for 2015 and 2016

[thackney]

Oil Discoveries Are Down for 2015 and 2016
http://oilpro.com/post/27012/oil-discoveries-down-2015-and-2016
8/30/2016

Oil discoveries in 2015 were at a 70-year low. There were only about a tenth as much discovered as there has been annually on average since 1960. And explorers are expecting to find even less in 2016, which is stirring up new fears about their ability to meet future demand, according to Bloomberg.

Drillers have severely cut exploration budgets since oil prices dropped to half during the price collapse two years ago. There have been 2. 7 barrels of new supply discovered in 2015, which is the smallest amount since 1947, according to Wood Mackenzie. And 2016 isn't looking so hot either: only 736 million barrels of conventional crude has been discovered since the end of July.

The EIA estimates there will be a global oil demand increase from 94.8 billion barrels per day to 105.3 million barrels in 2026. There is some hope that the U.S. shale boom could help with the gap, but growth has been stunted in the industry with prices sitting below $50 per barrel.

Bloomberg spoke with Nils-Henrik Bjurstroem, a senior project manager at Rystad Energy, who said that discoveries from conventional drilling are “at rock bottom,” which will have a huge impact on oil and gas supply.

For the moment, global inventories have been flooded by output from Russia and OPEC in an effort to defend market share; but despite this, the under-investment that's been happening in the industry will be felt as soon as 2025 according to Bjurstroem. "Producers will replace little more than one in 20 of the barrels consumed this year," Bloomberg reports from Bjurstroem's findings....

[thackney]

http://www.bloomberg.com/news/articles/2016-08-29/oil-discoveries-at-a-70-year-low-signal-a-supply-shortfall-ahead

...Ten years down the line, when the low exploration data being seen now begins to hinder production, it will have a “significant potential to push oil prices up," Bjurstroem said.

“Exploration activity is among the easiest things to regulate, to take up and down," Statoil ASA Chief Executive Officer Eldar Saetre said Monday in an interview at the ONS Conference in Stavanger, Norway. “It’s not necessarily the right way to think. We need to keep a long-term perspective and maintain exploration activity through downturns as well, and Statoil has."

The Norwegian company will drill “a significant number” of wells in the Barents Sea over the next two to three years, exploration head Tim Dodson said Tuesday at the same conference. Given current levels of investment across the industry and decline rates at existing fields, a “significant” supply gap may open up by 2040, he said....

[IsailedawayfromFR]

Am not surprised as exploration dollars swing inversely with the crude price.   I was in Exploration and know of many people that were retired.

What hampers activity once prices come back up is the fact that companies have been gravitating away from what people had referred to 'Exploration' and instead targeting unconventional development with those capital dollars.

The latter is a big swing in conventional thinking of how to increase supply.

And this is just for crude.  Unconventional gas has been on the effective backburner for years, awaiting an upswing of gas prices.

[Smokin Joe]

There has been a shift in the  mindset toward drilling a well. It was at one time that the prospect was selected on the basis of anticipated high priority zones having likely production. On the way, though, other serendipitious discoveries were investigated, drill stem tested, and new resources found that had not been anticipated. Better than 10% of the wells I worked had that bonus, sometimes the essential thing to save the well, as the original targets did not pan out. Some of the discoveries were in field. 
With the advent of targeting specific unconventional zones for horizontal drilling, the eagerness to investigate such shows of hydrocarbons went by the boards in the quest to drill farther, faster, and get those laterals in.

While the relatively sure thing of the unconventional resource generally paid for the well and gave a ROI, I always look for what's next, not just at what we do today. Unfortunately, few operators (oil companies) were interested in those shows of hydrocarbons. With time, as the unconventional reserves decline, perhaps that data will be reviewed and those zones evaluated.

[IsailedawayfromFR]

While the relatively sure thing of the unconventional resource generally paid for the well and gave a ROI, I always look for what's next, not just at what we do today. Unfortunately, few operators (oil companies) were interested in those shows of hydrocarbons. With time, as the unconventional reserves decline, perhaps that data will be reviewed and those zones evaluated.

You are correct, there is a lot less exploration of new resources out there, particularly in conventional traps.  Instead, the ability to gain per well reserves unconventionally is the driver.

There is such a large amount of oil in place (Steve Holditch estimated at 10 times the conventional oil in place in basins) that it will be a long time until that occurs.  There will be a decreasingly smaller value extracted per well as the core areas are exploited.  At some point, the risks of going back toward traditional exploration will be worthwhile.

It will take awhile, as when I worked domestic exploration, risks that had to be absorbed were quite high, and made most prospects less than a 20% COS.

[Smokin Joe]

One of the beauties of the Williston Basin are the stacked potential pay horizons. While many of those are below the Bakken/Three Forks, (Nisku/Birdbear, Duperow, Interlake, Stonewall, Gunton, Red River, Winnipeg, Deadwood formations, to name a few), there are others above The Bakken/Three Forks as well. While hydrocarbon shows are logged in those formations, the shows are generally not being investigated. Some of these targets, given the anisotropic nature of carbonate reservoirs, are also good targets for horizontal drilling. Granted, the low hanging fruit will be picked first, but there will also be potential for re-entry laterals in those shallower zones afterwards (through casing windows on pad wells), or as new wellbores purpose drilled for that target.  These would be more conventional reservoirs, but have the advantage of better understanding of local structure to keep out of the water from the underlying Bakken/Three Forks structure.

Considering that (basin wide) there are 22 different oil and/or gas producing geological formations (23 if you count the Pronghorn), and I lumped a few area specific intervals in with their larger formation designation (and left out any coal bed methane), well, there is a lot to look at.

[IsailedawayfromFR]

One of the beauties of the Williston Basin are the stacked potential pay horizons. While many of those are below the Bakken/Three Forks, (Nisku/Birdbear, Duperow, Interlake, Stonewall, Gunton, Red River, Winnipeg, Deadwood formations, to name a few), there are others above The Bakken/Three Forks as well. While hydrocarbon shows are logged in those formations, the shows are generally not being investigated. Some of these targets, given the anisotropic nature of carbonate reservoirs, are also good targets for horizontal drilling. Granted, the low hanging fruit will be picked first, but there will also be potential for re-entry laterals in those shallower zones afterwards (through casing windows on pad wells), or as new wellbores purpose drilled for that target.  These would be more conventional reservoirs, but have the advantage of better understanding of local structure to keep out of the water from the underlying Bakken/Three Forks structure.

Considering that (basin wide) there are 22 different oil and/or gas producing geological formations (23 if you count the Pronghorn), and I lumped a few area specific intervals in with their larger formation designation (and left out any coal bed methane), well, there is a lot to look at.

I agree, there are multiple horizons to go after at some stage.  My company did so with mixed results. Risks were not worth the rewards, considering all.  Red River was example, even with 3D.

Due to the risk component, one can always get something in another Bakken infill, whereas chasing a promising Duperow lead may result in zilch.