Africa’s deepwater leads global oil, gas exploration

Deepwater areas of Africa and the Eastern Mediterranean are set to lead the global oil and gas industry in a $22 billion yearly exploration spending.

Although the spending excludes appraisal, the development which was revealed in a report released by Wood Mackenzie showed recovery from historic lows.

The recovery was hinged on attractive exploration economics, the need for energy security and the emergence of new frontiers.

These indicators, according to the research body would incentivize oil and gas companies, led by national oil firms and major oil companies, to increase exploration spending through 2027.

Titled ‘Exploration quietly recovering’, the director of global exploration research at Wood Mackenzie, Julie Wilson, said explorers would become bolder in the coming years.

Wilson said: “While this rebound might surprise some, it must be seen in context. Exploration went through a boom during 2006-2014 and spending peaked at $79 billion (in 2023 terms). But in the prior six years, the average was $27 billion per year in 2023 terms.

“While spending will increase, it will not return to anywhere close to past highs and there will likely be a ceiling on the increase. There is a lack of high-quality prospects that would satisfy today’s economic and ESG metrics and a continued focus on capital discipline will keep a lid on overspending.”

The report noted that the growth is likely in 2023, with spending projected to increase 6.8 per cent over 2022 totals.

It added that a major driver for the increased activity is the robust business case.

According to Wood Mackenzie, full-cycle returns from exploration have been consistently above 10 per cent since 2018 and exceeded 20 per cent in 2022.

Wilson said: “These positive results have increased confidence in exploration. Improved results are down to many factors. Portfolio high grading coupled with greater discipline in spending and prospect choice means only the best prospects are drilled and waste is minimized. Efficiency gains also serve to enhance the returns from both development and exploration.”

In the long term, the report noted that deepwater and ultra-deepwater would provide the most growth opportunities for exploration. The Atlantic Margin of Africa and the Eastern Mediterranean regions will experience the greatest growth and there will be spending in some unspecified new frontiers.