The award this week of Atlantic margin acreage off Ireland to supermajors, independents and junior oil companies is a reminder that the upstream industry is not giving up on high hopes for frontier deep-water regions to host major oil and gas resources.
Spending on deep-water wildcatting has been slashed in the past 18 months and drilling campaigns curtailed, aside from exceptional plays such as Guyana, Mauritania-Senegal, Ivory Coast, Uruguay, Vietnam, Mexico and Canada.
But the results of the Irish round highlight how certain companies are looking to the future as they prepare for an oil price upturn, perhaps in 2017.
They are re-stocking exploration portfolios with attractive acreage on which they have to spend little in the initial years until they drill.
The benefit of this approach is that they can carry out analysis and evaluation and also acquire fresh seismic data cheaply before committing to drill a well. Rig rates may have increased by the time wildcatting starts, but with cash preservation a priority for companies whose shareholders are averse to seeing their investment used to probe risky deep-water plays, this is the short-term sacrifice they must make.
What is the attraction of the Irish acreage? The belief is that the southern Porcupine basin is on trend with the Flemish Pass basin on Canada’s conjugate margin, home to Statoil’s deep- water Bay du Nord oil discovery.
The multiple awards secured in the Irish round by Statoil and ExxonMobil, another Flemish Pass basin believer, underscores the perception of Porcupine’s potential. The presence of BP and Eni adds weight to this view.
It’s not just the North Atlantic that is on upstream players’ deep-water radar in these straitened times. Last month, Shell secured a Black Sea licence off Bulgaria, chasing what is thought to be the same new play on which it drilled a wildcat last year off Turkey.
Off Guyana, Repsol and ExxonMobil are beefing up their positions on the back of the US giant’s Liza discovery.
The message is clear — successful deep-water exploration will remain vital for majors and supermajors to replace their reserves.
(This article first appeared in the comment section of the 4 March, 2016 issue of Upstream newspaper.)