With global energy demand continuing to soar, hydrocarbons will remain the dominant source to meet the challenge over the next several decades.
Key to the upstream industry meeting this challenge will be the process of identifying new and neglected plays, and the use of new seismic technologies, according to one of the keynote speakers at the PETEX 2014 event in London, England. Richard Herbert, Chief Operating Officer, Exploration at BP, highlighted a number of global trends in exploration that he believes will be factors as energy demand continues on its ongoing growth curve.
“Energy demand continues to rise, and is forecast to keep rising in the future. The outlook to 2035 shows, interestingly, that the world is essentially divided into two. There is the OECD world, in which there is very limited growth, virtually none at all. We are seeing high levels of energy efficiency, more and more conversion of coal into gas, and increasing concern and even alarm about the levels of CO2 emissions into the atmosphere,” he said.
On the other hand, he continued, there is the “non-OECD world,” which sees continued population growth, rising incomes and increasing demand for oil and gas. For the foreseeable future that will have to be met from hydrocarbons, and the industry has proven in the past it can rise to the challenge, said Herbert.
Global reserves have risen consistently, he pointed out, with oil reserves in 1981 being 700 Bbbl while by 2012 those reserves had grown to about 1.67 Tbbl, despite the fact that 850 Bbbl has been produced between. “The industry has been extremely successful in renewing itself and growing its resource base, and exploration has of course played a big part in this,” he said. Herbert flagged up the “major change” brought about by unconventionals in recent years, which have raised estimates for hydrocarbons in place by about 50%, from about 30 Tbbl of oil in place to about 45 Tbbl of oil in place.
Over the last 30 years the industry has found around 20-25 Bboe of conventional resources every year, he continued, with the last decade or so dominated by deepwater. In more recent years shale oil, shale gas and tight gas have further added to that momentum.
Offshore the industry continues to explore in key conventional areas such as the Brazilian presalt, which he described as having acted as a driver for the industry, while explorers have also now taken that to explore the corresponding margin offshore West Africa.
Onshore he highlighted significant exploration success in areas such as the Kurdistan region of Iraq and East African rifts, in addition of course to the massive advances made in North America. “Having said all of that, when you add together all the conventional resources that have been found in the last decade, they still don’t match the enormous quantities of resource that have been unlocked in North America in unconventional resources,” he commented. Putting that in perspective, he pointed out that with the US growing its Lower 48 production from almost nothing to about 4 MMb/d of tight oil, it had had an “enormous impact” and was akin to “adding another OPEC country, bigger than any other apart from Saudi Arabia”.
Concluding, Herbert stated: “The future of exploration is difficult to predict. But I do believe that explorers have to be optimists, and the industry has a long and distinguished track record for finding the oil and gas that the world demands.”
Offshore, he said deepwater will continue to stay significant in terms of spend and activity, and “be important for the next 10-20 years” but costs and risks will increase significantly as it goes into new and frontier basins. Over time it will become less dominant, he added, with others plays such as gas, unconventionals and the Arctic eventually becoming more prevalent.
For unconventionals, he pointed out that their sustainability at times of low commodity prices has yet to be fully tested, and challenges remain to replicate the U.S. success elsewhere.
But technology would continue to give new opportunities, particularly in seismic imaging, which should enable the industry to sustain the success it has had so far.
Shell’s Alistair Milne, Vice President, Sub-Saharan Africa, echoed the same demand and supply situation as Herbert, adding that hydrocarbons would continue to dominate the energy supply outlook going forward (oil, gas and coal will still supply a forecast 60% of the energy mix in 2050). But that challenge will involve the industry adding some 700 Bbbl of new oil reserves just to replace the next two decades of oil production. “At Shell we calculate that to meet this demand the world will need to add new production of some 40 MMb/d of oil in this decade from fields that haven’t been developed yet.” This would be like adding four times what Saudi Arabia produces today to meet that, he said.
Milne went on to outline both Shell’s near-term and long-term strategic plans for its exploration, in its “heartland” areas where it is focused on testing new concepts and plays in mature basins such as the Gulf of Mexico and Malaysia, and also in new frontiers. “In the past three years in Shell we have added 17 new frontier positions to our global portfolio,” he said. Success factors for this will include using new technical paradigms and the company’s geological experience, he added, and “translating this understanding into new opportunities to access acreage where we can mature well proposals into material frontier prospects”.
Milne highlighted Shell’s own areas of interest, including the Arctic, Western and Southern Africa, and the importance of making a long-term commitment to these areas, not only in terms of a timeframe but in terms of relationships with the countries and people involved.
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