Corrects timeline for well drilling plans in third paragraph after clarification from the company. Story originally published on 25 August.
Exploration is back on the agenda after a relative lull, with oil majors redoubling their efforts in the search for new reserves.
This renewed push is driven in part by a growing realisation that oil will be needed for decades to come. As momentum behind the energy transition loses some of its sparkle, producers are looking to restock their cupboards after a period in which exploration was to some degree sidelined by cost-cutting efforts and a reluctance to tap high-risk locations. For top European producers — including BP and Shell — this will mean getting their oil and gas portfolios back on track after spending much of their recent time and money on renewables.
Their US rivals are motivated by different considerations. After previously focusing on building up its shale holdings on home turf, Chevron is stepping up exploration efforts with plans to drill a well in Suriname in the fourth quarter and consider others in Namibia and Egypt in coming years.And ExxonMobil is also looking to dig its heels in, following on from its runaway success in Guyana, where an estimated 11bn bl of recoverable resources have been discovered over the past 10 years.
That is not to say exploration budgets will ever reach the dizzying heights seen in the first half of the last decade, as capital discipline will likely remain the guiding force. New technology twinned with artificial intelligence may help speed up timelines, and the preference could be for targets close to existing production areas. "Exploration spend we do see will be more tilted towards resource expansion within known plays or exploration that's proximal to existing infrastructure over a really true frontier exploration," consultancy Enverus senior analyst Drew Depoe says.
Chevron readily admits that its exploration results have not been up to par of late, and the company is making some changes as a result. "I'm not happy with the results out of exploration over the last few years, but I want to acknowledge that our exploration team has been operating in a pretty narrow range," chief executive Mike Wirth told analysts earlier this month. Chevron has already made progress in refilling the pipeline when it comes to frontier acreage. "We've increased our portfolio by over 20pc as you look over the last couple of years," vice-chairman Mark Nelson says. The second-biggest US major has streamlined its exploration organisation and brought in talent from Hess, the US independent it recently acquired.
Back to the frontier
Chevron is also on the verge of making inroads into federal Iraq's upstream sector, having signed a preliminary agreement with the government in Baghdad to develop four exploration blocks after previous efforts faltered. Meanwhile, ExxonMobil recently agreed a production-sharing contract for an ultra-deepwater block in Trinidad and Tobago — its first time there since a failed exploration programme in 2003. The top US major is also heading back to Libya after more than a decade away, having reached an exploration agreement with the country's state-owned national oil company.
Lower oil prices could put pressure on firms' cash flows for exploration, but this may not deter future investment. "They're going to be taking a very long-term view on the commodity and making sure they have a resource that's available to be exploited in the 2035-40 timeframe," Depoe says.
And interest is not just confined to the majors, as US independent operators are looking to get in on the act by seeking to export their shale expertise to overseas projects as domestic opportunities slow. EOG Resources is focusing on the UAE and Bahrain, while Continental Resources is part of a joint venture looking to tap unconventional deposits in Turkey.
