What's new in exploration

“Stupid money” – Angelina Jolie’s comment about her pay for Lara Croft: Tomb Raiders 

Shale has an 84+-year history of producing about 5% to 8% of in-place, perm-locked hydrocarbon-gas, even less for oil from micro-Darcy rock. Conventional has a 160+-year history of producing 10% to 20% oil, first try, from milli-Darcy reservoirs, then add >10%, second try, with plain water. 

Is most oil money that’s spent today aimed at the highest, most efficient yields? Did we train investors to fear exploration? Is it easier to break old rocks than find new, porous ones? Big Oil is spending to understand nanno Darcy rock—good. But why reduce research in revitalizing conventional reservoirs, unless pressured by environmentalists?

Stupid: After 15 years of mainly shale, unconventional fracing has led us to where any investment in conventional onshore is endangered. Shale players have no concern for exploration and only minor participation in research. Most Oil have little incentive or impetus to explore new territory. A savings windfall? No. A report that 38 new offshore exploration discoveries were made in third-quarter 2019 is encouraging, except that this number translates to only 38 discovery wells. However, step-out “exploration” activity remains active offshore. According to the U.S. EIA, conventional oil production in the U.S. GOM should reach a record, averaging 1.9 MMbpd in 2019 and 2.0 MMbpd in 2020. The federal 1995 tax law has been allowing some operators in the GOM to operate royalty-free since 2000, reference the Government Accounting Office. Old dogs, new tricks.

Stupid: During an OPCOM meeting in Jakarta, we presented budget numbers for development of a Kakap platform; fictional top line, ~$100 million for the steel, various cats below adding to $150 million, lastly additional seismic of $5 million (that part for real). The oil company’s executive V.P. for production in that meeting said his budget was for $150 million, not $155 million, so we would SAVE money by cutting seismic. All sat quiet, except me of course, and the partners. Later at the exploration budget roll-up, we asked for a lot more seismic. “Enough” money became the company’s first marine 3D seismic, solved enormous problems understanding reservoir geology, and led to two more platforms for my engineering buddies.

Stupid: Budget “discipline” and BU sell-offs have become slow suicide. I argue that money for better technology is needed to extract more efficient resources. In 1987, USX spent more on union worker potty breaks than subsidiary MOC was allowed to spend on all exploration—people, drilling, bids, overhead and seismic—supposedly saving X’s money. Thirty years later, Oil continues to focus on cutting budgets in R&D. Shell is reported to have spent about $986 million on all R&D in 2018, including its petrochem unit, down from $1.318 billion in 2013 (https://www.statista.com/statistics/260315/spending-on-research-and-development-by-royal-dutch-shell/).  And MOC? Well, you read the news.  

Climate stupid: There is more than enough oil and gas within reach of a drill bit to sustain the planet over 200 years, without serious environmental impact. My quote, “Our industry’s ability to safely access, and protect, the environment in future oil & gas exploration remains impaired because of ignorant politics of the Green movement.” Alternative quote, “…Yet the oil and gas industry is set to spend $4.9 trillion (yes, trillion) over the next ten years on exploration and extraction in new fields. That’s an eye-watering amount of money to spend on fossil fuels we need to leave in the ground.” (https://www.globalwitness.org/en/blog/big-oil-set-to-spend-5-trillion/)

Sorry Greenies, it just ain’t so. New exploration is less than 1/100th of that claim. Extraction is less than one-tenth

Stupid correctness: “Americans would rather reduce oil and gas exploration than drill...”? (https://www.greenwichtime.com/​news/article/Americans-would-rather-reduce-oil-and-gas-14561763.php). What then would Americans rather do?  The American Pet Products Association last March announced that “pet care spending in 2018 reached a record-breaking high of $72.56 billion, compared to $69.51 billion in 2017, an increase of over 4 percent.…” (https://www.americanpetproducts.org/press_releasedetail.asp?v=ALL&id=191)

Wood Mackenzie expects that “global exploration and appraisal spending in 2019 will stay close to its current level–slightly below US$40 billion per year” (but roughly 60% below its 2014 peak). (https://www.woodmac.com/news/opinion/can-exploration-stay-profitable-2019/)

Until 2019, Discovery, or Conventional exploration for oil and gas had gone down about 15%/year, but pet food revenue had increased more than 5%/year. Oil or cow methane bad, puppy or goldfish methane good.

Legal stupid: “If companies like Exxon accurately account for the necessary degree of regulation to prevent even more dangerous global warming from happening, it will make less and less sense to continue to invest in developing fossil fuel projects,” said Michael Burger, executive director of the Sabin Center for Climate Change Law at Columbia University… https://news.yahoo.com/exxon-trial-probes-oil-giant-184228967.html  Or, the BLM stops a lease sale in Utah because of a lawsuit by environmentalists, claiming the agency did not adequately assess the impact on climate before leasing.

Exploration is the victim today, the rest of us tomorrow.

About the Authors

William (Bill) Head

Contributing Editor

William (Bill) Head is a technologist with over 40 years of experience in U.S. and international exploration.