Global E&P Drilling Rebounds: Report

The number of global oil and gas exploration wells drilled last year was 23% more than in 2016, according to analysis by 1Derrick. The total plunged from 1,331 in 2014 to 444 in 2016, but rebounded to 546 last year.

The most dramatic cuts in exploration took place offshore Africa, where the number of wells fell 79% from 228 in 2014 to 47 in 2017. That number is expected to jump to 85 in 2018, with high-impact wells planned offshore Gabon, Congo, and Gambia offshore West Africa and offshore Namibia and the Republic of South Africa on the southern portion of the continent.

Excluding drilling by national oil companies (NOCs), global exploration wells spuds are expected to rise 19% this year, a slower rate than last year's growth, it said. South and central America (112 wells), the North Sea/Europe (91 wells), and Africa (85 wells) will be the major targets of drilling activity, the company's database showed.

“The curtailment of oil and gas exploration was one of the most dramatic effects of the steep drop in oil prices in late 2014,” commented Mangesh Hirve, COO of 1Derrick. “Producer strategies shifted from long-term resource growth to short-term survival as they slashed capital budgets and shifted focus to cash-flow producing assets. The high-impact, expensive deepwater exploration was the biggest casualty, as the majors – UK BP, US major ExxonMobil, Anglo-Dutch Shell, US Chevron and French Total – reduced drilling by 75% from 121 wells in 2013 to just 31 in 2017. However, that number is expected to grow by more than 50% to 48 in 2018 as oil prices have stabilised in the $60/barrel range.”

The bigger producers such as Eni, Australia's Woodside Petroleum, Spain's Repsol and Apache and Anadarko Petroleum of the US plan 49 exploration wells focused primarily on deepwater wells in the North Sea/Europe, the US Gulf of Mexico, and Asia/Australia regions. Eni announced a major gas discovery in February 2018 from its Calypso 1 well offshore Cyprus. Smaller producers will drill 105 exploratory wells, the largest of any peer group, largely focusing on lower-cost drilling on prospective onshore plays in Australia and Colombia, it said.

NOCs have historically drilled the highest number of exploration wells, including about one-third of all spuds, or an average of 430, in 2011-2014. The most active drillers include Petrobras (Brazil), Statoil (Norway), Pemex (Mexico), ONGC (India), Ecopetrol (Colombia), and Cnooc (China). The number of spuds plummeted to about 134 in 2016 and 141 in 2017, just 26% of reported wells. The relatively slower recovery likely reflects the higher impact of the oil price plunge on state-owned institutions that lacked the flexibility to quickly cut spending and shift strategy. The pace of recovery in 2018 won’t be clear until the end of the year, because NOCs rarely disclose future drilling plans.

The most stable regions were North America, primarily the Gulf of Mexico, and North Sea/Europe, where drilling fell off less than 50% between 2014 and 2016. 

“While the 2017 and 2018 data demonstrate the pace of global exploration has stabilised, there are no indications that the industry will revert to 2011-2014 activity levels any time soon,” Hirve said. “Major oil and gas companies are continuing to high-grade rather than expand their portfolios, which are increasingly focused on lower-cost, high return resource plays." It would take a much higher oil price to move the needle further than that, he said.