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Oil and gas exploration plays a critical role in decarbonisation despite investment decline

06 Dec, 2024
Oil and gas exploration plays a critical role in decarbonisation despite investment decline



Investment in oil and gas exploration has dropped by two-thirds over the past decade, yet the industry remains crucial for decarbonisation efforts and providing advantaged barrels in the energy transition, according to Wood Mackenzie’s latest Horizons report.

The report, No country for old fields: Why high-impact oil and gas exploration is still needed, reveals that current global resources are sufficient to meet demand, with approximately three trillion barrels of oil equivalent (boe) inventory.

This translates to resource lives exceeding 45 years for oil and 60 years for gas.

Andrew Latham, a spokesperson for Wood Mackenzie, highlighted that successful exploration reduces carbon intensity, lowers consumer costs, and adds value for resource holders and explorers.

He noted that investment in new supply is necessary to replace dirtier alternatives, as demand remains resilient.

The report suggests that discovering new fields is more effective in lowering scope 1 and 2 emissions than improving old ones.

New fields are cleaner due to modern decarbonisation technologies and higher facilities throughput.

Wood Mackenzie’s Lens Upstream data shows that new fields starting production in the coming years will average scope 1 and 2 emissions intensity of 17 kgCO2e/boe over 2025-30, compared to 28 kgCO2e/boe for existing supply from mature fields.

Latham stated: “Exploration through the current decade is on track to provide 12 per cent of global oil and gas supply. If these new fields displace existing supply options with emissions intensity typical of older fields, global scope 1 and 2 emissions in 2030 would be cut by around 6 per cent or 100 Mtpa CO2e.”

The industry’s exploration performance has been economically attractive since upstream costs reset a decade ago.

Full-cycle returns have consistently been in double digits every year since 2015, averaging 15 per cent.

Deepwater exploration in frontier basins offers the most effective plays, with frontier drilling adding over 80 million boe per well, more than seven times that of wells in mature plays.

Deepwater projects also tend to have lower emissions intensity than shelf and onshore projects.

Despite the industry finding less in recent years compared to previous decades, this is primarily due to drilling fewer wells.

The global creaming curve shows a steady trend of around 30 million boe discovered per well, unchanged over the past four decades.

While significant exploration opportunities still exist, the industry faces image problems.

Latham concluded that “the widespread perception that exploration is bad for the climate threatens everything from access to opportunity and the social licence to operate to talent attraction and retention.

“Exploration has a role to play in decarbonising oil and gas supply.”

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