KUALA LUMPUR (Sept 8): Global oil and gas exploration is set to falter this year, as the number of licensed blocks and total acreage fall to near all-time lows, as the sector struggles to shake off the effects of the Covid-19 pandemic and the ensuing oil market crash, according to Oslo-based energy consulting firm Rystad Energy.
In a statement on Wednesday (Sept 7), Rystad said only 21 lease rounds were completed globally through August, half of the 42 rounds held in the first eight months of 2021.
It said the acreage awarded so far this year has shrunk to a 20-year low of 320,000 sq km.
Rystad said global lease rounds are expected to total 44 this year, 14 less than in 2021 and the lowest level since 2000.
It said global spending on exploration has been falling in recent years, as oil and gas companies seek to limit risk by focusing on core producing assets and regions with guaranteed output, aiming to streamline their operations and build a more resilient business amid market uncertainty and the threat of a recession.
The firm said the political landscape is also contributing to the decrease in licence awards, with many governments pausing or halting leases, and encouraging companies to wrap up exploration activity within already awarded blocks.
It said this trend is likely to continue, as governments are less eager to invest in fossil fuel production, and instead look ahead to a net-zero future.
Rystad vice-president of analysis Aatisha Mahajan said global exploration activity has been on a downward trend in recent years, even before the Covid-19 pandemic and oil market crash, and that looks set to continue this year and beyond.
“It is clear that oil and gas companies are unwilling to take on the increased risk associated with new exploration or exploration in environmentally or politically sensitive areas,” said Mahajan.
Rystad said the onshore exploration sector is a significant contributor to the decline in awarded acreage.
It said total onshore acreage awarded in leasing activity has plummeted from more than 560,000 sq km in 2019, to a mere 115,000 sq km so far this year.
Offshore leased acreage also hit a high point in 2019, before dropping off a cliff in 2020, and has remained relatively flat in the past two years, it said.
Rystad said concluded lease rounds have dropped significantly in Russia, the US and Australia this year.
It said that put together, these countries have held five lease rounds so far this year, with three in Russia and one each in the US and Australia, down from 17 rounds in the first eight months of 2021 (consisting of eight in Russia, five in the US, and four in Australia).
The drop in the US was primarily driven by the cancellation of Lease Sales 259 and 261 in the Gulf of Mexico and Cook Inlet in Alaska, it said.
Meanwhile, Rystad said Asian licensing has bucked the trend, with increased activity and blocks awarded in Malaysia, Indonesia, India and Pakistan.
It said the global decline in licensing rounds has directly affected the awarded acreage, which has hit an all-time low for the January to August period of about 320,000 sq km.