Oil and gas exploration is expected to drop this year with licensed blocks and total acreage next to all-time lows as the sector struggles to recover from the effects of the covid pandemic and the resulting oil market crash, a new analysis from energy intelligence firm Rystad suggests.
Through August of this year, only 21 lease rounds had been completed globally, accounting for half of the 42 rounds held in the first eight months of 2021. This year, global lease rounds are expected to total 44, 14 fewer than in 2021 and the lowest level since 2000.
Rystad noted that global exploration spending has decreased in recent years as oil and gas companies seek to limit risk by focusing on core producing assets and regions with guaranteed output, aiming to streamline operations and build a more resilient business in the face of market uncertainty and the threat of a recession.
The political landscape is also contributing to the decrease in license awards, with many governments pausing or halting leases and encouraging companies to wrap up exploration activity within already awarded blocks. This trend is likely to continue as governments are less eager to invest in fossil fuel production and instead look ahead to a net zero future.
“Global exploration activity has been on a downward trend in recent years, even before the covid pandemic and oil market crash, and that looks set to continue this year and beyond. It is clear that oil and gas companies are unwilling to take on the increased risk associated with new exploration or exploration in environmentally or politically sensitive areas,” said Aatisha Mahajan, vice president of analysis at Rystad Energy.
Brazil is the largest contributor in terms of blocks awarded so far this year, with 59 auctioned during its third permanent offer round. Shell and TotalEnergies each received six of the eight offshore blocks, while regional players received the remaining 51 onshore blocks.
Other sizeable block awards were in Norway, with 54 new licenses in its APA 2021 round, India with 29 blocks, and Kazakhstan’s fourth oil and gas auction round, in which 11 blocks were awarded. There was also some sporadic activity in Africa between January and August, with Egypt providing rights to explore nine blocks and Angola granting two blocks. In addition, there was an offshore licensing round in Uruguay, where three exploration blocks were awarded.