Energy consultancy Wood Mackenzie (Woodmac) said today that competition for the best exploration targets will be “fierce” in 2018.
Woodmac said about 40 licensing rounds would be held over the next 12 months and that the struggle for quality acreage would become more intense as majors chase the same opportunities.
The most high profile licensing rounds will be in Brazil and Mexico, it said.
Woodmac said investment and well counts would “remain stubbornly low” as most companies maintain a “highly cautious approach” to exploration.
As such, the consultancy does not expect to see a surge of activity this year.
Andrew Latham, vice-president of global exploration research at Woodmac, said the number of committed explorers had dwindled and that much of the industry was chasing similar opportunities.
“This raises the spectre of sharper competition eroding margins – a threat not seen since 2014,” Mr Latham said.
Woodmac predicts that only majors, a “handful” of national oil companies and the “top few” independents will be able to lead “high-impact” drilling programmes.
It said industry consolidation, the price downturn and the pull of unconventional opportunities had reduced the number of “wildcatters” operating in the sector.
Mr Latham said: “Once again, the majors will be the explorers to watch. They sense a bottom-of-the-cycle opportunity to build acreage at low cost.
“Their exploration cuts have been less deep and their overall market share will continue to grow.”
Woodmac expects exploration budgets to remain tight despite an improving price outlook.
Exploration’s share of upstream investment has slipped to below 10% since 2016 and is not about to recover.
However, Mr Latham said there were early signs that the exploration sector may soon return to profit.
Many exploration costs have halved compared to their 2014 peak, helped by quicker drilling turnaround times.
And most of the upcoming wells will avoid the expensive rig contracts from the boom years.
Mr Latham said: “Looking to 2018, the industry will drill fewer, better wells focused on plays that are commercially attractive.
“After a few difficult years, the economic outlook is at last looking brighter for explorers.”
