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Global spending on exploration has been cut to $40 billion this year.
Global spending on exploration has been cut to $40 billion this year.

Oil Discoveries at 70-Year Low

Oil Discoveries at 70-Year Low

Explorers in 2015 discovered only about a tenth as much oil as they have annually on average since 1960. This year, they will probably find even less, spurring new fears about their ability to meet future demand.
With oil prices down by more than half since the price collapse two years ago, drillers have cut their exploration budgets to the bone. The result: Just 2.7 billion barrels of new supply was discovered in 2015, the smallest amount since 1947, according to figures from Edinburgh-based consulting firm Wood Mackenzie Ltd, Bloomberg reported.
This year, drillers found just 736 million barrels of conventional crude as of the end of last month.
That is a concern for the industry at a time when the US Energy Information Administration estimates that global oil demand will grow from 94.8 million barrels a day this year to 105.3 million barrels in 2026. While the US shale boom could potentially make up the difference, prices locked in below $50 a barrel have undercut any substantial growth there.
New discoveries from conventional drilling, meanwhile, are “at rock bottom,” said Nils-Henrik Bjurstroem, a senior project manager at Oslo-based consultants Rystad Energy AS. “There will definitely be a strong impact on oil and gas supply, and especially oil.”
Global inventories have been buoyed by full-throttle output from Russia and OPEC, which have flooded the world with oil despite depressed prices as they defend market share. But years of underinvestment will be felt as soon as 2025, Bjurstroem said.
Global spending on exploration, from seismic studies to actual drilling, has been cut to $40 billion this year from about $100 billion in 2014, said Andrew Latham, Wood Mackenzie’s vice president for global exploration. Moving ahead, spending is likely to remain at the same level through 2018, he said.
Exploration is easier to scratch than development investments because of shorter supplier-contract commitments. This year, it will make up about 13% of the industry’s spending, down from as much as 18% historically, Latham said.
The result is less drilling, even as the market downturn has driven down the cost of operations.

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