The global oil market could face a supply shortfall of 4.5 million barrels per day by 2035 if exploration success doesn't improve, according to a new study by Wood Mackenzie.
In its report, Wood Mac says discoveries in recent years have been disappointing with the volume of liquids discovered per annum more than halving over the period between 2008 and 2015. The current oil price environment has caused exploration budgets to be slashed over the last few months and Wood Mackenzie forecasts that in 2016 the industry will invest half of the levels seen in previous years.
Patrick Gibson, director of global oil supply research at Wood Mackenzie said in a company statement:
"We have conducted a comprehensive study of the impact of exploration rates on global oil supply using our proprietary database and analyzing all conventional fields discovered since 2000. Over 7,000 conventional fields have been discovered in the last 15 years and although these developments will play a critical role in securing future oil supply in the medium term, modelling a continuation of poor exploration results shows that the market could see a 4.5 million bpd shortfall by 2035."
Andrew Latham, vice president of exploration research at Wood Mackenzie said in a Wood Mac release:
"In the last four years the industry has seen disappointing - largely gas prone - exploration results, with the volume of liquids discovered annually falling from around 19 billion barrels between 2008-2011 to 8 billion barrels between 2012-2015. The price downturn has resulted in large reductions in exploration spend and activity levels have been significantly impacted. Just 2.9 billion barrels of liquids were discovered globally in 2015. We currently expect the industry to invest $40 billion per year in exploration and appraisal over 2016 to 2018, less than half its investment during 2012 to 2014.
"A number of sizable discoveries were made during the 2000s, when budgets and exploration activity peaked. Substantial volumes of oil from these finds are still to be produced - around 90 percent of the liquids discovered – which should ensure supply growth in the medium term. Conventional exploration success during the 2000s could add 18 million bpd by 2025, in addition to increasing tight oil recovery. However, the shift in the industry's focus towards exploring smaller near field opportunities with lower cost bases and shorter lead times, now means that fewer large, high risk frontier finds are likely to be made in the near term.”
Wood Mackenzie estimates that over 10 percent of global liquids supply by 2035 will be sourced from conventional volumes that are yet to be discovered. Africa, Latin America and North America will account for around 60 percent of those volumes, according to Wood Mac.
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