According to a recent report by Wood Mackenzie, spending on oil and gas exploration is expected to rebound from historical lows, averaging around $22 billion annually over the next five years. The report highlights that deep-water regions in Africa and the Eastern Mediterranean are poised to take the lead in the global oil and gas industry’s annual exploration spending, which is projected to reach a substantial $22 billion.
Wood Mackenzie’s data shows a significant recovery in exploration spending from historical lows. The rebound is attributed to favorable exploration economics, a desire to provide energy security, and the emergence of new unexplored territory. These elements are likely to provide substantial incentives for oil and gas companies, as well as foreign oil companies, to increase their exploration investments over the next six years.
Named “Exploration quietly recovering,” the report’s insights were shared by Julie Wilson, the Director of Global Exploration Research at Wood Mackenzie. Wilson anticipates a more daring approach from exploratory endeavors in the years ahead.
Wilson elaborated, “While this rebound might catch some off guard, it’s essential to consider the context. Exploration witnessed a boom from 2006 to 2014, with spending reaching a peak of $79 billion (adjusted to 2023 values). However, in the preceding six years, the annual average stood at $27 billion (2023 terms).”
The report emphasizes that the rising momentum is expected to continue in 2023, with a 6.8% increase in spending higher than 2022 totals. The strong commercial case is a primary driving reason behind this increased activity.
Wood Mackenzie’s analysis reveals that the returns achieved throughout the full exploration cycle have consistently surpassed 10% since 2018 and even exceeded 20% in 2022. Wilson commented, “These encouraging outcomes have bolstered confidence in exploration efforts. The improved results stem from a range of factors. Portfolio enhancement, combined with more judicious spending and prospect selection, ensures that only the most promising prospects are pursued, minimizing wastage. Efficiency gains further amplify returns from both development and exploration activities.”
Wilson added, “The enhanced results can be attributed to several factors. Rigorous portfolio selection, coupled with disciplined spending and strategic prospect choices, ensures that only the most promising opportunities are pursued, minimizing waste.”
In the long term, Wood Mackenzie highlights that deep-water and ultra-deep-water exploration hold the most significant growth potential. The Atlantic Margin of Africa and the resource-rich Eastern Mediterranean are poised for the most substantial expansion.
Source: Oriental News, Leadership, National News
