Global oil and gas discoveries set to hit lowest level in 75 years, Rystad Energy says

The 4.7 billion barrels of oil-equivalent hydrocarbons discovered this year are less than half of discoveries made last year

A pump jack operates in front of a drilling rig at sunset in an oil field in Texas. Global hydrocarbon discoveries are set to hit their lowest level since 1946. Reuters

Global oil and gas discoveries in 2021 are on track to hit the lowest full-year level in 75 years if the remainder of this month does not yield significant hydrocarbons finds, Rysdat Energy reported.

Total global discovered volumes of oil and gas this year is estimated at 4.7 billion barrels of oil equivalent (boe) and with no major finds announced so far in December, the industry is set to hit the lowest discoveries mark since 1946, the US-based independent energy research and data analytics company said.

The 2021 hydrocarbon discoveries are also less than half of the 12.5 billion boe discovered in 2020.

“Although some of the highly ranked prospects are scheduled to be drilled before the end of the year, even a substantial discovery may not be able to contribute towards 2021 discovered volumes as these wells may not be completed in this calendar year,” Palzor Shenga, vice president of upstream research at Rystad, said.

“The cumulative discovered volume for 2021 is on course to be its lowest in decades.”

Liquids continue to dominate the hydrocarbon mix, making up 66 per cent of total finds. Seven new discoveries were announced in November 2021, unearthing about 219 million boe of new volumes. The monthly average of discovered volumes this year stands at 424 million boe, Rystad data show.

The largest discovery in November was Russian group Lukoil’s Yoti West off the coast of Mexico, which is estimated to hold about 75 million boe of recoverable resources. However, these volumes are still insufficient for commercial development and would require further discoveries of a comparable scale before a development concept could be drawn up.

Norway continued to unearth small-to-medium finds, providing an opportunity to materialise these discoveries with available infrastructure, Rystad said.

However, Abu Dhabi’s state-owned producer Adnoc in December announced the discovery of significant conventional oil, condensate and gas resources of up to 1 billion boe from an exploration well in Abu Dhabi’s onshore Block 4 concession.

The block is operated by Japan's Inpex Corporation and the discovery includes substantial Murban oil resources, Adnoc said at the time.

Global oil demand is expected to plateau by the mid-2030s, but crude is expected to remain the biggest component of the international energy mix until 2045, as the world's population increases and the global economy more than doubles in size to $270 trillion, Opec said in its “World Oil Outlook 2021" report in September.

Demand is forecast to rise by 17.6 million barrels per day in two and a half decades, growing to 108.2 million bpd in 2045 from 90.6 million bpd in 2020, Opec estimates show.

However, underinvestment in the hydrocarbons sector amid green transition efforts and changing government regulations could lead to lower discoveries, higher oil prices and growing energy scarcity, the latest report from the International Energy Forum and IHS Markit says.

The total investment in the upstream sector of the oil and gas sector fell 23 per cent below pre-coronavirus levels to $341 billion in 2021, while oil demand continued to rise globally, the report said.

The global oil and gas industry requires more than $600bn of investment annually until 2030 to keep pace with the rising demand, Dr Sultan Al Jaber, UAE Minister of Industry and Advanced Technology and managing director and group chief executive of Adnoc, told the Abu Dhabi International Petroleum Exhibition and Conference.

Echoing his views, Suhail Al Mazrouei, UAE Minister of Energy and Infrastructure, said a lack of investment in securing future energy supplies could extend the cycle of higher oil prices.

Oil prices topped $80 per barrel last month, but have pulled back since to trade above the $70 a barrel mark amid growing concerns over global economic growth due to the spread of the Omicron variant of coronavirus.

JP Morgan, the largest lender in the US, in its latest oil review, said underinvestment in the oil and gas sector over the past 18 months has hit the output capacity of many producer countries and their ability to respond to a rise in oil demand.

It predicted that Brent, the benchmark for more than half of the world’s crude, will “overshoot” to $125 a barrel next year and $150 a barrel in 2023, on the back of this scenario.