Wood Mackenzie forecasts that in 2016 the oil and gas industry will invest half of the levels seen in previous years and warns that the global oil market could face a supply shortfall of 4.5 million bpd by 2035, if exploration success doesn't improve.
In a new study Wood Mackenzie says discoveries in recent years have been disappointing, with the volume of liquids discovered per annum more than halving over the period 2008 to 2015. Although significant discoveries made during the 2000s are key in securing medium term oil supply, unless exploration results improve continued supply growth in the longer term will become unsustainable.
Patrick Gibson, director of Global Oil Supply Research at Wood Mackenzie said: "We have conducted a comprehensive study of the impact of exploration rates on global oil supply using our proprietary database and analysing all conventional fields discovered since 2000. Over 7,000 conventional fields have been discovered in the last 15 years and although these developments will play a critical role in securing future oil supply in the medium term, modelling a continuation of poor exploration results shows that the market could see a 4.5 million b/d shortfall by 2035."
Dr Andrew Latham, vice president of exploration research at Wood Mackenzie explained: "The price downturn has resulted in large reductions in exploration spend and activity levels have been significantly impacted - just 2.9 billion barrels of liquids were discovered globally in 2015. We currently expect the industry to invest US$40 billion per year in exploration and appraisal over 2016 to 2018 - less than half its investment during 2012 to 2014."
Wood Mackenzie estimates that over 10 per cent of global liquids supply by 2035 will be sourced from conventional volumes that are yet to be discovered - Africa, Latin America and North America will account for around 60 per cent of those volumes.
Gibson summarised: "Existing discoveries do of course have a key role to play in future global oil supply, but unless exploration results start to improve significantly, continued supply growth will become unsustainable. We forecast that by 2030, production from fields discovered since 2000 will be in decline, and we could see a shortfall of 4.5 million bpd by 2035, if the current annual average (8 billion barrels) of discovered liquids continues. This is why the size and nature of the next tranche of discoveries is crucial for maintaining long term global oil supply growth."