Buzz is back in the exploration game as sector eyes new horizons



OPINION: After a decade in the doldrums, a sense of optimism has taken hold among long-beleaguered oil and gas explorers.

At the recent Business & Exploration Opportunities Show (BEOS) in London, the feel-good buzz in the air was palpable, even while accepting that the exploration game has always attracted bullish, convincing players with glass-half-full personalities.

The upbeat mood at BEOS — organised by the venerable 110-year-old American Association of Petroleum Geologists and 60-year-old Geoscience Energy Society of Great Britain — was a far cry from the bad old days of 2014 when seasoned geologists, geophysicists, sedimentologists and basin modellers were among the first to be shown the door as the industry crashed.

Sky-high costs saw oil companies press the pause button on discretionary exploration spend, an industry-wide trend backed by many investors who felt they had been “burned” after the failure of a rash of high-profile and costly wildcats.

These investors ploughed billions into supporting high-risk wells and, on the back of some major successes such as Tullow Oil’s Jubilee discovery in Ghana in 2007, became caught up in the prevailing exploration hype.

Driven by a fear of missing out, investors were profligate in financing what were, in hindsight, some very risky probes proffered by companies that talked a good exploration game.

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Ironically, two of the highest-profile drilling failures were in Namibia, where Brazil’s HRT and UK-based Chariot Oil & Gas decided to embark on solo exploration campaigns.

Namibia, of course, is now one of the world’s exploration hotspots following the recent mighty oil finds made by TotalEnergies and Shell.

Exceptions

Other exceptions to the downbeat exploration mood in this period include big discoveries in Guyana, Brazil, Senegal, Mauritania and Egypt, to name just a few, albeit these were mainly drilled by supermajors.

A degree of confidence was returning to the global exploration patch about five years ago, but this was soon reversed by a triple whammy of Covid, negative oil prices and the energy transition.

Despondency rapidly returned to the exploration arena, many veterans quit the scene and industry observers were wondering if the end of exploration was nigh.

However, in the past year or so there has been a slow-motion rebound as the world realises fossil fuels will be a foundation of the world’s energy systems for decades to come and additional oil and gas must be found to replace fast-dwindling resources.

But this time around, the recovery has a different ambience because exploration activities are constrained by climate-change considerations, mainly in wealthy Western nations whose economies have benefited greatly from oil and gas exploitation and generated the bulk of carbon dioxide emissions over the past century or so.

This net-zero movement is slowly strangling sources of exploration finance, while a glut of legal challenges delay drilling.

In industrialised nations, long gone are the days when oil and gas exploration would barely register in the public consciousness — it has become another climate-focused battleground.

These challenges temper the current excitement around exploration.

Even explorers who once again have a spring in their step, have got their mojo back and are itching to see their favourite prospect drilled, are fully aware the sector will never return to its halcyon days.

External forces are slowly closing the windows of opportunity to drill exploration wells, in terms of time and geography.

(This is an Upstream opinion article.)