The number of conventional oil and gas discoveries made worldwide—both onshore and offshore—in 2015 was 191, less than half of the average annual number of discoveries for the previous nine years.

The number of exploration wells drilled also tumbled, dropping nearly 50% in 2015 to less than 640 compared with the average of more than 1,130 between 2006 and 2012. In addition, exploration budgets are lower, down between 30% and 50% in 2016 compared to year ago.

But the declines, as shared by Wood Mackenzie, are not the biggest issue facing the oil and gas industry today. That designation goes to the industry’s ability to commercialize discoveries, according to Julie Wilson, research director of global exploration for the firm.

With oil prices half of what they were about two years ago, the result of an oversupply-driven downturn and not enough demand, many companies are not making as much money as they did in the past. In turn, companies have lowered their exploration budgets and postponed plans for some major offshore projects until market conditions improve. But today’s slowdown could lead to a supply crunch later as global energy demand grows.

“In the near term, we don’t believe that the downward trend in drilling activity, number of discoveries and overall volumes will be reversed,” Wilson told Hart Energy in an emailed statement Sept. 1. “Over the next three years or more, exploration will be smaller, leaner, more efficient and generally lower-risk. The biggest issue exploration has faced recently is the difficulty in commercializing discoveries—turning resources into reserves.”

The reasons are abundant.

For offshore operations, deeper water, HP/HT conditions and remoteness have compounded industry inflation, Wilson said. “An increasing proportion of gas has also brought commercialization complexities,” she added.

Data from Wood Mackenzie show there were 191 conventional discoveries, excluding Russia, made in 2015. That was down from an average of 430 in the previous nine years. The drop, Wilson said, was due to fewer wells being drilled. Success rates have also dropped.

Fewer than 60 conventional oil and gas discoveries were made by the end of July 2016. The year is on track to have fewer discoveries than 2015, she added, although the second half of the year typically brings news of more oil and gas finds.

“There’s no doubt that exploration is becoming more difficult as the big tertiary deltas mature and explorers must move to different types of geology that are less well-understood and more difficult to predict, for example subsalt, basin floor fans, abrupt margins, stratigraphic traps,” Wilson said.

However, 2015 was not dismal on all fronts.

The average discovery size in 2015 was 66 million barrels of oil equivalent (MMboe), which was more than the average 47 MMboe for the 2006-2009 period and the 58 MMboe average for 2013-2015, Wood Mackenzie data showed.

Plus, some regions are bucking the trend. These include Eni’s gigantic Zohr gas discovery in the Shorouk Block of the Mediterranean Sea.

On Sept. 1, Eni said it drilled the fifth well on the deepwater structure, proving the presence of a carbonatic reservoir and gas accumulation in the southwestern part of Zohr. The Zohr 5x well hit a hydrocarbon column of about 180 meters (m), or 590 ft. The results, Eni said, confirm the potential of the field at 30 Tcf original gas in place.

“The well was also successfully tested opening 90 m of reservoir section to production. The data collected during the test confirmed the great deliverability of the Zohr reservoir, in line with the Zohr 2 well test, producing more than 50 million cubic feet per day [MMcf/d] limited only by the constraints of the drilling ship production facilities,” Eni said. “In the production configuration, the well is estimated to deliver up to 250 [MMcf/d].”

Eni plans to drill a sixth well later this year as it works on a fast-track to first gas by year-end 2017.

ExxonMobil Corp.’s (NYSE: XOM) frontier exploration efforts offshore Guyana also appear promising. In June, the company called Liza-2, the second exploration well drilled by the company, a “world-class discovery” that could add between 800 MM and 1.4 B oil-equivalent barrels of recoverable resources.

“The message is that volume is not the fundamental problem for exploration,” Wilson said, referring to the concern of commercializing discoveries.

Companies are not likely to change their thrifty ways anytime soon as they seek out savings and ways to find and develop oil and gas faster at lower costs. Wood Mackenzie forecasts overall 2016 spending will be less than half of the more than $90 billion spent at peak 2014.

“The exploration industry will refocus on prospects that are closer to infrastructure, allowing them to develop them more quickly and cheaply,” Wilson said. “They will generally target prospects that are lower-risk, both above and below ground. Tax shelter [from existing production] will be important, as will attractiveness of fiscal terms offered by governments.”

The industry’s ability to find and commercialize conventional oil and gas discoveries will be crucial in helping meet future energy needs.

“Over the next 5-8 years, there is a lot of resource already discovered that could be developed to supply world demand, especially in gas,” Wilson said. “But by 2025 and beyond, the oil supply gap opens up, and we will need new discoveries to fulfil demand, assuming demand continues to grow as we predict.”

It typically takes at least about 10 years to develop and bring a large deepwater discovery onstream, she added. “So the impact will be felt in a decade or so.”

Production growth from U.S. shale plays could help.

According to the U.S. Energy Information Administration’s International Energy Outlook, global energy consumption is forecast to reach 815 quadrillion British thermal units in 2040, a 48% increase from 2012.

Velda Addison can be reached at