Oil and gas discoveries recover, but still far from replacing output

After hitting rock bottom in OSLO the past two years, global oil and natural gas exploration is picking up again. But it’s still far from replacing what’s being produced.

Companies are likely to drill three per cent more offshore exploration wells this year and boost the number by another eight per cent in 2019 after activity dropped every year since 2011, according to Oslo-based consultant Rystad Energy AS. The amount of oil and gas discovered in 2018 is on track to rise by about 20 per cent compared with last year, which was the worst since at least the 1940s.

The forecasts show how crude’s resurgence is giving oil companies the firepower to start investing. Exploration spending was one of the first expenses to be chopped during the industry rout, resulting in newly discovered volumes of so-called conventional oil and gas falling to the lowest on record in 2017. Still, new finds won’t be enough to alleviate concerns of a supply shortage by the middle of the next decade.

Even if explorers were to discover about 10 billion barrels of oil and gas this year, they would only replace about 21 per cent of the volumes that will be produced globally, up from 18 per cent last year, said Nils-Henrik Bjurstrom, a product portfolio manager at Rystad.

“It’s not a strong recovery,” he said on Tuesday. “It’s rather that the trend has turned.”