NOCs to Slash Exploration Budgets by Over a Quarter
National oil companies (NOCs) around the world will slash their exploration budgets by over a quarter on average in 2020, Wood Mackenzie (WoodMac) estimates.
The company’s analysis is based on announcements and tracking well plans of 11 “top spending” NOC explorers, comprising three Chinese NOCs, PTTEP, Petronas, ONGC, Qatar Petroleum, Rosneft, Gazprom, Petrobras and Pemex. Collectively, their combined original budgets may be reduced by about 26 percent, or $5 billion, this year, WoodMac outlined.
“While the range of exploration budget cuts for the NOCs is slightly more diversified than that of the majors, conventional exploration remains important for them,” Wood Mackenzie Senior Analyst Huong Tra Ho said in a company statement.
“Most NOCs consistently spent between 12 percent and 35 percent of their upstream budgets on exploration, an average of about 17 percent over the 2015-2019 period. This is significantly higher than the majors’ average spend of eight percent of upstream budgets on exploration,” Ho added.
“Given how important exploration is for the NOCs and their growing share of global new discoveries, these budget cuts are likely short-term measures rather than long-term. We expect NOCs to revitalize their exploration programs as the sector recovers,” Ho continued.
NOCs with substantial international presence will prioritize domestic activity, with deeper cuts to overseas budget, according to WoodMac, which added that NOCs with constrained domestic resources could place more strategic importance on exploration compared to those with resource abundance.
WoodMac is an energy research and consultancy company which was established in 1923. The company’s 500 analysts and consultants influence the governments, boards and CEOs who help shape the future of the world's natural resources, according to WoodMac’s website. The business, which is part of the Verisk family, is headquartered in Edinburgh, Scotland, but has offices all around the world.
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