Oil discoveries have fallen to a six-decade low, as explorers cut billions of dollars of spending to ride out the biggest market slump in a generation. About 12.1 billion barrels of oil reserves were found in 2015, marking a fifth consecutive year of decline and the smallest volume since 1952, Oslo-based industry consultant Rystad Energy said in a note, Bloomberg reported.
Oil exploration is typically the first casualty of a crude-price collapse. Companies from BP to Royal Dutch Shell have cut budgets and staff, as they focus on keeping existing fields going and maintaining shareholder payouts.
The lack of new discoveries could affect long-term supply, as it takes five to 10 years to bring new finds to production, depending on location, prices and demand. “Short term, there is no shortage of oil,” Martijn Rats, an analyst at Morgan Stanley in London, wrote in a May 20 report that estimated exploration spending at about $95 billion last year, down 45% from 2013.
“Any impact of the recent poor exploration results will have to play out over the long run.” The pace of oil discoveries will probably remain unchanged through to 2018, Rystad Energy said.
Still, global climate targets are likely to curb oil consumption, meaning that existing resources could be sufficient to meet demand for the next two decades, according to Morgan Stanley.
Citing the International Energy Agency’s base-case scenario, the bank said the gap between demand and supply would remain “small” and “further exploration is required but only modestly so”.
