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Shale oil is expected to double its market share of global crude supply to an estimated 10% within five years. but the lack of investment offshore during the industry downturn in 2015 and 2016 could begin having an impact in that same period. the CEO of Hess Corporation said Monday.
Global exploration. which consumed $100 billion of capital in 2014. is now down 60% to $40 billion. and that figure has been steady for the last three years. CEO John Hess said at the CERAWeek by IHS Markit conference.
`Last year was the lowest level of resources added from exploration in the last seven years.` he said. `That will have a long-term impact.`
For example. Gulf of Mexico production will start to plateau in 2020. he said. Mexico`s oil — much of which once came from from a single field. Cantarell. in the Bay of Campeche — is dwindling. as is crude output from Angola and the North Sea. except Norway.
Cantarell now produces 100.000 b d. down from 2 million b d in the mid-2000s.
The Gulf of Mexico produced 1.59 million b d of oil in fourth-quarter 2017. according to the US Energy Information Administration. and output is still climbing based on new developments that were sanctioned before the downturn and came online in the last few years. with some still to start up.
EIA projects that US Gulf of Mexico production. from both shallow- and deepwater projects. will average 1.70 million b d in first-quarter 2018 and peak during Q2 2019 at 1.82 million b d.
Many oil companies that had been enthusiastic Gulf of Mexico explorers. or explored offshore in other global basins. either pared down their offshore spending or completely exited the play after the 2009 downturn. More recently. many companies that had continued offshore drilling since then have cut back and put more dollars into onshore shale plays. which offered quicker financial payouts.
Companies that continue to operate offshore have particularly poured fewer dollars into wildcat exploration. opting instead to drill around existing discoveries which can be brought online quickly and relatively cheaply.
In the Gulf of Mexico. 14 offshore rigs were operating as of Friday. compared to 60 in December 2014. according to Baker Hughes. which issues a North American weekly rig count.
Offshore. `lack of investment will start forcing production declines and plateaus at a time that the world needs more supply.` John Hess said.
Also on Monday. the International Energy Agency issued its 2018 Oil Market Report. which foresees upstream investment as potentially not sufficient to avoid what it called a `significant squeezing` of global spare capacity by 2023. even though costs have fallen and project efficiency has improved. Analysts say that is especially true for offshore where investment has declined.
`Due to long lead times and continued cost deflation. investment in conventional offshore developments looks set to decline again this year. However. there are signs of renewed optimism about spending for the longer term with a number of offshore projects sanctioned last year.` the IEA report said.
