Oil Discoveries at Lowest Since 1940s

Oil Discoveries at Lowest Since 1940sOil Discoveries at Lowest Since 1940s

The oil industry discovered the least amount of oil in 2017 in almost eight decades, breaking the previous record low set in 2016.

The global oil industry has discovered less than 7 billion barrels of oil equivalent so far this year—a drop-off from the 8 billion barrels discovered last year, RT reported.

Last year’s total was the lowest since the 1940s. The 2017 figure is down by more than half from the 15 billion barrels discovered in 2014-15, and down sharply from the 30 billion barrels discovered in 2012.

The plunge is the result of a third consecutive year of relatively low upstream exploration budgets. Many oil companies slashed their spending on exploration when the market downturn began in 2014 and they have yet to restore that spending to anything close to pre-2014 levels.

“We haven’t seen anything like this since the 1940s,” Sonia Mlada Passos, senior analyst at Rystad Energy, said in a statement.

“The discovered volumes averaged at around 550 million barrels of oil equivalent per month. The most worrisome is the fact that the reserve replacement ratio in the current year reached only 11% (for oil and gas combined)—compared to over 50% in 2012.”

The reserve-replacement ratio measures the volume of oil that is discovered relative to what is produced in a given year. The industry needs to discover 100% of what it produces in order to avoid a decline in reserves.

Rystad Energy says that 2006 was the last year in which the industry posted a reserve-replacement ratio above 100%. The implication is that the world is burning oil at a faster rate than the industry is discovering new reserves.

Moreover, Rystad said the volume of resources per discovered field also declined in 2017. For instance, the average offshore discovery in 2012 held roughly 150 million barrels of oil equivalent in 2012, a figure that fell significantly to just 100 million barrels this year.

That matters because smaller fields tend to be less economic and may not be enticing enough to be developed at all.

“Low resources per discovered field can influence its commerciality. Under our current base case price scenario, we estimate that over 1 billion barrels discovered during 2017 might never be developed,” Rystad’s Passos said.

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