Oil Companies to Invest $37bn in Exploration in 2018

A new report by Wood Mackenzie indicates that global investment in conventional exploration and appraisal will be around $37 billion in 2018, about seven per cent less than 2017 spend of $40 billion, and over 60 per cent below its 2014 peak.

According to the report, the majors’ investment will be cut back relatively less, trimmed by around four per cent versus 2017.

The report noted that as some of the last outstanding pre-crash high-rate rig contracts roll over, average well costs should trend lower, while wildcat counts may creep above this year’s numbers.

Wood Mackenzie stated that the exploration sector has emerged from the downturn confident that it has put its house in order, but added that it does not expect to see a surge in activity in 2018.

Vice President, Research, Global Exploration, Wood Mackenzie, Dr Andrew Latham, said it was expected most companies would maintain a highly cautious approach to exploration for a while yet.

According to Latham, competition for the best opportunities will be fierce, while industry investment and well counts will remain stubbornly low in 2018.

“We have identified five issues that stand out this year, but two are key. Firstly, the number of committed explorers has dwindled and corporate diversity will remain unusually low. Secondly, much of the industry is chasing rather similar opportunities. Play and basin diversity will also be unusually narrow. This raises the spectre of sharper competition eroding margins – a threat not seen since 2014,” he said.

The report listed five key themes that would affect exploration sector in 2018 to include: fewer explorers focused on fewer plays; investment remaining supressed; big wells mainly in deepwater and frontiers; acreage reloading gathering pace; and long overdue move back to profitability.

Wood Mackenzie stated that industry consolidation, the price downturn and the attractions of unconventional alternatives have reduced the number of wildcatters operating in the

The Petroleum Club, an advocacy group whose members are made up of leaders of the petroleum industry in Nigeria, has listed the conditions to ensure uninterrupted supply of petrol in the country.

In its position paper on the severe shortages of petrol, which the country faced in recent weeks, the oil industry stakeholders traced the primary cause of the problem to the recent rise in crude oil prices.

The club, however, noted that there are a number of structural issues that need to be addressed so that a smooth supply of petroleum products can be sustained throughout the country over the long term.

According to the paper, which was signed by the Chairman of Board of Directors, Mr. Godswill Ihetu, these structural issues include: the level of domestic refinery production, petroleum product distribution infrastructure, the respective roles of NNPC and the private sector in petroleum product importation, and the subsidy regime aimed at achieving a fixed, uniform pump price throughout the country.

On the issue of domestic refining, the group stated that it is clear that private management and operatorship of the refineries is required as well as private investment for repairing, upgrading and, in due course, expanding them.

“If outright sale of the refineries is not desired, there are other models that can be adopted, which may be acceptable to all stakeholders, particularly if the process of bringing in the private investment is transparent,” the Club said. The Petroleum Club also argued that efficient distribution of petroleum products requires good distribution infrastructure.

“An extensive national network of pipelines and depots, as well as import and export terminals was built by NNPC in the 1970s and 1980s (and more recently to serve the Federal Capital Territory) and several private entities have built their own storage facilities,” it said.

The Petroleum Club, however, noted that many of the NNPC depots have fallen into disrepair, pipelines have been vandalised and some facilities are not operational at all.

According to the group, this has resulted in product distribution across the country becoming much more difficult and expensive.

“We are pleased to note that, as part of the effort to improve product supply, NNPC has done a lot of work at a number of depots and positive results have been achieved. Like the refineries, the product distribution system operates as a department of NNPC and an arrangement acceptable to all the stakeholders needs to be made for private management of the facilities and for the injection of private capital for making them fully functional, with up to date technology for operation, security surveillance,” the group added.

The Petroleum Club also stated that the recent severe product shortage has resulted in friction between the NNPC and the oil traders that signed the Direct Sale-Direct Purchase (DSDP) contractors, who have been accused of not importing the stipulated amounts of petrol and of importing larger amounts of deregulated products such as diesel, contrary to the provisions of their contracts.