The Biggest Oil & Gas Discoveries Of 2019
The world is still making huge oil discoveries. There’s just
nothing conventional about them.
Conventional oil and gas discoveries have fallen by the
wayside since the shale boom and the subsequent oil price collapse. In fact,
they’ve fallen to their lowest in 70 years. But there are still some amazing
discoveries in the mysterious deep.
All in all, this year has seen new discoveries of nearly 8
billion barrels of oil equivalent, compared to 10 billion barrels of oil
equivalent discovered last year.
But what’s most striking is that new discoveries aren’t even
close to keeping pace with the loss of conventional resources. According to
Rystad, the current resource replacement ratio for conventional resources is
only 16 percent. In other words, only one barrel out of every six consumed is
being replaced with new resources.
So not only has our pace of discovery declined, but
discoveries are also in much more challenging geological venues and typically
offshore, which means it could take many years just to bring new resources
online.
While Russia technically has chalked up the most oil discoveries
in terms of Bboe of recoverable reserves, the year’s not over yet, and the
Guyana-Suriname basin is proven a tantalizing prospect. Not only has ExxonMobil
made 14 discoveries there, but Tullow has chimed in with two of its own nearby,
and Apache is drilling right now in the Suriname side of this basin.
If Apache strikes, then investors will be looking for a
repeat of the dramatic discovery pace right across the maritime border in
Guyana.
But until then, it’s Russia in the number one spot on the discovery
chart for 2019, followed by Guyana and Cyprus.
#1 Russia - 1.5 Bboe in Russian Arctic Waters
So far this year, Russia has discovered nearly 1.5 billion
barrels of oil equivalent (Bboe) thanks to the Dinkov and Nyarmeyskoye finds on
the Yamal peninsula shelf in the Kara Sea. In natural gas terms, that’s a
whopping 17 trillion cubic feet (Tcf).
But this is gas for Gazprom. When it comes to Arctic oil,
Russia’s state-run Rosneft is having a tougher time.
To get its Arctic projects off the ground, Rosneft will need
$40 billion in tax cuts from the government. According to The Moscow Times,
Rosneft had secured a deal with Indian financiers to invest in a 15-20-percent
stake, but that was only going to happen if Rosneft was granted a $40-billion tax
break over the next 30 years.
The problem for investors is that while Rosneft’s Vostok Oil
project reserves are worth around $15 billion, climate change is causing oil
and gas infrastructure to sink into the ground, making the project even more
costly.
So, Russia may be leading discoveries so far this year, but
extraction is another issue entirely.
#2 Guyana: More Than 6 Billion Barrels, And Climbing
ExxonMobil just put Guyana on the oil and gas map for the
first time.
It’s not just a big discovery; it’s a huge discovery. In
fact, it’s a string of 14 discoveries so far - just from Exxon. Tullow Oil has
also announced two discoveries.
Prior to the last three discoveries listed below, Guyana had
already hit 6 billion barrels of oil equivalent in the Stabroek Block.
Then came these in rapid succession:
- Discovery No. 14: Tripletail-1, Exxon.
- Discovery No. 15: Jethro-1, Tullow -
With partners Total, Eco Atlantic, and Qatar Petroleum, Tullow expects its
find near 100 million barrels from
Jethro-1 in Guyana’s Orinduik block, where the well encountered 55 meters of
net oil pay in August.
- Discovery No. 16: Joe-1, Tullow - Piggybacking
on the success of Jethro-1, Tullow announced in September that it had made its
second oil discovery in Guyana. Joe-1 encountered 14 meters of net pay. The
find was important for Tullow, who said the find de-risks the west part of the
Orinduik Block, were a number of other similar prospects had already been
identified.
The potential for Guyana is huge, with some estimating
Guyana’s future production at 750,000 within the next five years - which would
be essentially one barrel of oil produced for every man, woman, and child -
every day.
What could possibly trip this up? Well, for starters, a
maritime border dispute with Venezuela, and some tricky domestic politics that
will see an election next spring, right about the time Exxon is expecting first
production from it’s Liza Phase 1 project.
#3 Cyprus: Up to 8 trillion cubic feet of disputed gas
In February, Exxon made the biggest natural gas discovery in
two years off the coast of Cyprus.
Exxon discovered an estimated 5-8 trillion cubic feet, which
the European Union is greedily eyeing as a pathway to a new Mediterranean gas
hub that will reduce Russian dominance in the region.
Everyone knew this discovery would be problematic for
Turkey. And Erdogan has responded with the promised zeal by provocatively
sending its own drillships to Cyprus’ offshore EEZ to start drilling on its
own.
The Turks say that Cypriots have no jurisdiction to explore
for natural gas here. The Cypriots disagree, as does the entire Western world.
Will Turkey win this battle? Not likely, but investors
certainly weren’t keen on Italian oil giant Eni’s recent statement that if
Turkey sent warships to the area, it would stop drilling wells.
2019 And Beyond: What Venues to Watch
The top three venues to keep an eye on heading in Q4 and
heading into the New Year are Suriname and the Gulf of Mexico.
When it comes to Suriname, the government - and any savvy
investor - is anticipating that the massive finds in next-door Guyana extend
across the maritime border. And while so far no one’s managed to strike black
gold here, next up is Apache, and it’s drilling in the sweet spot right next to
one of Exxon’s, tight up to the border. Drilling results are expected any day.
In the Gulf of Mexico, Shell - along with Chevron, Equinor,
and Repsol - found one of its largest oil discoveries ever in April, in the
Perdido Corridor in the US Gulf of Mexico. The exploration well encountered
more than 400 feet of net oil pay. Shell has been particularly successful in
deepwaters in the Gulf of Mexico and is on track to produce more than 900,000
barrels of oil equivalent per day by next year - from oil it has already
discovered.
US Federal Gulf of Mexico (GOM) crude production averaged
1.8 bpd in 2018. That was a new record, and the EIA expects another record this
year and next. In fact, production looks set to hit 1.9 million bpd this year,
and 2 million bpd in 2020.
Source: EIA
While exploration has now shifted offshore for any big
discoveries, ramping up production takes time, and even with 2 million bpd by
2020, the GOM will still only account for about 15 percent of total US crude
production.
Onshore production is outpacing offshore, but the age of discoveries onshore is over. The future game of discovery is decidedly in deep waters.