The Hydrocarbon Exploration and Production Industry in 2019

From GeoExPro
Jane  Whaley

Top Hydrocarbon Discoveries of 2018. Source: Rystad Energy Cube 2018

My 2018 New Year editorial suggested that the E&P industry was moving out of the slump produced by the dramatic 2014 drop in the oil price and that better things were ahead. To a certain extent I have been proved right. According to analysts Rystad Energy, 2018 was the best year for discoveries since 2015, with over 9 Bboe found altogether, 82% of it offshore. Exploration spending, which has dropped by more than 60% since 2014, finally stabilised in 2018. This, allied to an improved success rate, primarily due to smarter technology, has resulted in an lower discovery cost per barrel of oil equivalent, while reserves replacement has also shown improvement, rising from 11% in 2017 to 15% in 2018.

The general atmosphere when talking to colleagues in the industry at the many conferences, exhibitions and seminars I attend has also turned relatively optimistic; in fact PETEX, the biennial meeting of the Petroleum Society of Great Britain, held in November, even had the title ‘A Renewed Optimism’. However, as the oil price started once again to nose dive, with Brent crude dropping from nearly US$85 in early September to just above US$50 in late December – a value last seen in the middle of 2017 – one has to ask if this optimism is justified.

I think that a cautiously optimistic outlook is reasonable; reserves need to be replaced, so we need to get exploring again. According to Tom Ellacott, senior vice president at Wood Mackenzie, E&P company’s portfolios and plans for 2019 are set to weather price volatility, with a strong commitment to capital discipline. After several years of frantically streamlining their portfolios and reducing their workforces, exploration companies seem to have an appetite for exploring once more, albeit with careful constraints on costs and working with a break-even oil price scenario of around $50 a barrel.

As evidence of this, recruitment has started to increase. Deidre O’Donnell, MD of specialist E&P recruiter Working Smart, reports that they are experiencing an increase in the number of new hires and consultancy roles globally. “It appears that there is a greater optimism and clients are now seriously considering increasing resources again. The demand over the last 12 months has been predominately in the digital transformation space, mainly for consultants on rolling contracts, but in recent months we have experienced a steady increase in commercial and geotechnical permanent roles and I believe that this will continue throughout 2019,” she says.

Read the rest of the article here.

HT/John B

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January 3, 2019 7:37 pm

So we’re discovering new deposits faster than we’re using known? If you look around the world where they’re actually doing exploratory we seem to be putting the “peak oil” meme to bed. Although at some time it will come true…… won’t it? 🙂

Reply to  markl
January 3, 2019 8:44 pm

When you find heaps you don’t keep exploring as it does not pay to keep expending money on exploration when you’ve reached your exploration objective. So that results in reductions in rates of new finds and declarations that … “oh noes, we is running out of energee!” Which goes on for several wide-eyed years. So companies eventually go explore more and find it and bring it to market, and the crazies can’t explain why the civilized world didn’t end on schedule? It all made ‘sense’. But the world market is once again awash in cheap hydrocarbons.

Jeff L
January 3, 2019 8:03 pm

Just as an FYI , here’s the original link:

“2018 was the best year for discoveries since 2015, with over 9 Bboe found”

Sounds great … but let’s put it in perspective …

For those not in the industry, Bboe stands for billion barrels of oil equivalent – taking the energy equivalent of gas discoveries and adding it to the liquid barrels found. Looking at the graphic , no less than 2 Bboe is actually natural gas, so the liquid discovery was no more than 7 Billion barrels ( although is doesn’t seem to include the big discovery in the Alaska North Slope … 3 Billion barrels of liquids… perhaps attributed to 2017?).

For perspective, the world uses ~ 100 MMbls of liquids per day… or +/- 36 Billion barrels per year. So , the liquid resources we found were around 20% +/- of what we used.

Talk amongst your selves on what that all means.

Reply to  Jeff L
January 3, 2019 9:38 pm

Most proved reserves additions come from existing field extensions and performance-related adjustments, not new discoveries.

Proved reserves are a moving target because they only represent a fraction of the oil that is likely to be produced from existing fields. “Reserves” has a very specific legal definition. In the US, “reserves” generally means proved reserves (1P). In less regulated nations, “reserves” often includes probable (2P) and/or possible (3P) reserves. Most of the “off limits” areas would fall under “prospective resources”…

In the US. “proved reserves” are the 1P number. This is the minimum volume of oil expected to be produced from a reservoir (>90% probability). Proved reserves go up all of the time without additional drilling because well performance converts 2P (50% probability) and some 3P (>10% probability) into 1P. Changing economic conditions can also move contingent resources into the 1P category.

Most reserve additions don’t come from new discoveries. They come from reservoir management and field development operations.

Reserve Growth

New discoveries are the brown curve at the bottom of the chart.

Recently Bloomberg put out a bar chart showing how the size of new oil discoveries has steadily shrunk over the past 70 years. Here’s that bar chart at the same scale as global crude oil production and reserve growth.

There’s an old saying in the oil patch: “Big fields get bigger.” The biggest field in the world, Saudi Arabia’s Ghawar oil field was discovered in 1948. When first discovered, the estimated ultimate recovery (EUR) was in the neighborhood of 60 Bbbl. It has produced over 65 Bbbl and it is estimated to have about 70 Bbbl remaining (EUR ~130 Bbbl). Half of Ghawar’s EUR was recognized at its discovery. Half of it, or more, will be the result of field development and reservoir management.

The Permian Basin, which is often referred to as if it was a single oil field is still growing and may exceed Ghawar. This growth is almost entirely due to extensions and performance-related adjustments, not new discoveries…

John W. Garrett
Reply to  David Middleton
January 4, 2019 7:49 am


Thank you David Middleton !!!

John W. Garrett
Reply to  David Middleton
January 4, 2019 9:13 am

Let us not forget the role that advances in drilling capabilities have played.

Forty years ago, if you’d said it would be possible to drill a 3,000′ deep well, then turn 90° and drill another 10,000′ horizontally, people would have carted you off to the funny farm.

Similarly, if you’d suggested that it would be possible to dynamically station a floating drilling vessel in 10,000′ feet of deep open ocean water and then drill another 5,000′ into the ocean floor, the world would have thought you crazy.

Only dreamers and science fiction fans would have predicted our ability to produce hydrocarbons using submerged wellheads and manifolds put in place and maintained by submersible remotely-operated vessels.

Bruce Cobb
Reply to  Jeff L
January 4, 2019 3:57 am

The real question is, are discoveries at least keeping up with both depletions of existing fields and with demand. I’m guessing they are, and then some.

January 4, 2019 1:57 am

The author is overly optimistic.

Tightening in the exploration sector has already happened. Hopefully it won’t get any worse.

Reply to  Mardler
January 4, 2019 10:48 am

not in ours. Our Norwegian E&P Co has increased its exploration well count in 2019 by 35%, 25 exploration wells…. unheard of since the golden days of 2014 and have been awarded 46% more licenses.

John W. Garrett
Reply to  AleaJactaEst
January 4, 2019 4:15 pm

Eqinor (formerly Statoil) has had horrendous exploratory results for decades.

As you know, Equinor (Statoil) are true believers in the AGW conjecture. I don’t know if that is a result of the government of Norway’s controlling ownership position or not (one would logically assume that it is).

Reply to  AleaJactaEst
January 4, 2019 4:19 pm

I’m talking about upstream exploration not drilling in existing fields

New exploration contracts have already been cancelled or negotiations are on hold. The US break point is $53 thus severely cutting all new exploration. There is already trouble.

Ron Long
January 4, 2019 2:32 am

I have a great deal of confidence that a stable demand/supply/price regime will also produce a stable exploration expenditure environment. At lower prices the exploration tends to concentrate in the most likely scenario to produce discovery, it, extensions and technique adjustments. It is the same in the mining business. If AlGore is waiting for the hydrocarbon business to self-destruct he is in for a long wait. Likewise if rational people are waiting for the green-ecoterroist crowd to disappear they are in for a long wait, because some entity is funding this nonsense.

Reply to  Ron Long
January 4, 2019 3:25 am

The never-ending problem is that higher prices boost spending, which boosts drilling, which boosts production, which lowers prices, drives down spending, drives down drilling, drives down production relative to demand, which eventually drives prices back up… ad nauseum…

The lack of capital investment should eventually lead to a supply deficit and >$80/bbl oil… But the fracking (and I don’t mean frac’ing) shale wells are too fracking easy to drill and put on production… Thank George Mitchell for what will likely be a protracted period of $40-$70/bbl oil prices.

John W. Garrett
Reply to  David Middleton
January 4, 2019 7:55 am

We all owe a great deal to George Mitchell and, perhaps, even more to the shareholders of Mitchell Energy & Development because they’re the ones who bore the brunt of George Mitchell’s obsession with frac’cing shale and the multiple decades of poor financial results the company suffered as a result thereof.

“A pioneer is a guy on a wagon with arrows in his back.”

John W. Garrett
January 4, 2019 7:59 am


Great article. Thanks for putting it up.

Johann Wundersamer
January 4, 2019 8:46 am

Stranded on the other side of ockhams razor blade.

Is this still science or oil interests.

January 4, 2019 9:09 am

So the fossil fuel major that wants not to be in fossil fuels (Shell) made two major discoveries of fossil fuels in 2018. I think they should give those discoveries away to others or “undiscover” them.

John W. Garrett
Reply to  ResourceGuy
January 4, 2019 9:53 am

As a long-term shareholder of Royal Dutch Shell, I am disgusted by the company’s craven kowtowing to the Green Blob.

Shell, however, is not alone in this absurd behavior. We all know about “Beyond Petroleum.” Even ExxonMobil recently volunteered some funding for those who’d like nothing better than to destroy that company.

Reply to  John W. Garrett
January 4, 2019 1:11 pm

Both companies have a long history of dealing with thugs. Add green thugs to the list.

January 4, 2019 10:11 am

John W. Garrett thanks for the link to George P. Mitchell. There are some interesting Youtube videos about him, “A Tribute to George P. Mitchell” on the Giant Magellan Telescope channel is one ( because he donated a lot of money towards funding it ). Also Wikipedia has an article about him.

January 4, 2019 12:23 pm

Should we be correct and this the Exploitation and Rape of Mother Gaia Industry?


January 5, 2019 10:26 am

Here is another interesting video, “Mark D. Zoback, Ph.D. on The Shale Gas Miracle: A Tribute to George P. Mitchell” on TAMEST channel. Skip to 2 minutes in where Zoback starts talking.
There is a follow on video from the same 2012 conference, “Dan B. Steward on The Shale Gas Miracle: A Tribute to George P. Mitchell”
Wikipedia says ,”The Academy of Medicine, Engineering & Science of Texas (TAMEST) is a not-for-profit interdisciplinary scientific organization, whose membership consists of all Texas-based members of the three national academies, including ten Nobel laureates”

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