Crude exploration wanes amid the energy downturn

Drillers in 2015 found lowest amount of oil outside of North America in more than 60 years, report says

The oil drillers that scour the world for new sources of petroleum stayed home last year, discovering the lowest amount of oil outside of North America in more than 60 years.

Dissuaded by a severe energy downturn that made survival the highest priority for many companies, the industry discovered 2.8 billion barrels of crude outside of North America last year, the lowest amount since 1952, according to a report released Monday by the research firm IHS Energy. Most of the new reserves were found offshore.

Last year’s discoveries amounted to just a fraction of the historical average of about 13 billion barrels a year, according to IHS. For the first time, oil discoveries have declined four consecutive years, IHS said, meaning that in a few years, despite the current glut, it will be difficult for the industry to restock the world’s energy supplies.

“Exploration has been charged with providing a quarter (of the oil and gas the world demands), but it has fallen short,” said Bob Fryklund, chief upstream strategist at IHS Energy. “We’re going to have to rely on other resources to make up the difference.”

More than 70 publicly traded oil companies cut their exploration spending by a third last year to cope with the plunge in oil prices.

Houston companies like Conoco Phillips, Anadarko Petroleum Corp. and EOG Resources cut spending for the search for crude by a combined $15 billion last year. Conoco Phillips, the third-largest U.S. oil company, said last year that it plans to wind down its deep-water exploration business in 2017.

Another Houston company, Apache Corp., cut exploration spending by nearly two thirds, to $4.5 billion.

Meanwhile, Marathon Oil Corp., also based in Houston, reduced its

spending by more than half, to $2.8 billion.

“The first thing that always gets cut is exploration because it’s discretionary,” Fryklund said.

Companies drilled 4,300 conventional exploration and appraisal wells last year, IHS says, compared to 5,300 in 2012.

Oil companies also retreated from the ocean depths. Deep-water drilling, defined as drilling in 1,000 to 5,000 feet of water, dropped by 20 percent last year, while drilling in waters more than 5,000 feet deep declined 40 percent.

Shale revolution

But it’s hard to overstate the impact of the U.S. energy boom on international exploration.

The so-called shale revolution drew oil producers to North America, away from more expensive and risky investments in international waters, Fryklund said.

From 2000 to 2010, all international exploration yielded 246 billion barrels in discovered resources, while shale formations in the United States alone added nearly 200 billion barrels.

‘Down the road’

“Still, if you curtail exploration by the massive amounts that we’re seeing, then it’s going to affect things — not today, not tomorrow, but five years down the road,” said Fryklund, noting that renewable sources such as wind and solar will have to play a bigger role.

“It’s all part of the transition to the future,” he added.