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IMPACT OF US SHALE?

Middle East oil, gas exploration 'declines'

Dubai, October 8, 2013

Middle East oil and gas production growth prospects have been dimmed by a slump in exploration license awards, drilling activity and average reserves found per well over the last few years, according to analysts Wood Mackenzie.
 
There was a sharp rise in licensing for international oil companies in the Middle East in the last decade - ranging from Iraq oil exploration to Qatari LNG projects - with drilling activity and the reserves found per well surging in the years that followed as a result.
 
After surging from around 20 licenses in 2000 to a peak of over 50 awarded in 2009, the number dived to around 15 by 2012, while the number of licenses handed back by international companies has more than doubled to around 20 per year over the last four years.
 
"We are going through the cycle again. We are on our way down again now, we are plummeting," Stewart Williams, principal Middle East energy analyst at Wood Mackenzie said.
 
"This year and last year we are seeing more relinquishments than awards. But there are still a healthy number of active licenses."
 
Huge conventional oil and gas reserves have attracted multi-billion dollar investments in the region for decades. But a boom in US shale oil and gas production over the last few years, and big new finds in Africa have made global energy giants like Exxon Mobil, Shell, Total and BP less keen to invest in unstable parts of the Middle East in the last few years.
 
Although the impact on global oil supplies of frequent attacks on Yemen's main oil export pipeline is limited, because it exported less than 130,000 barrels per day (bpd) in 2010 before Yemen descending into chaos in 2011, the long term impact of its instability on global supplies could be significant.
 
From 2005-2008, Yemen was the leading country in the Middle East in terms of number of exploration wells drilled, but drilling activity slumped in 2009, in part due to a worsening security situation.
 
Drilling has almost completely stopped since anti-government protests erupted in early 2011, while Syria, which was second only to Oman in drilling activity from 2010-2011, saw drilling stop in 2012 due to the civil war.
 
"Yemen was a phenomenal place to explore and reasonable successful for a non-Opec country. But with the troubles in Yemen this has really tailed off very quickly and last year we didn't see any exploration wells drilled in Yemen," Williams said, adding that activity could pick up after an upcoming licensing round.
 
The hiatus in drilling in Yemen and Syria has been partially offset by increased activity in Kurdistan and Israel. But overall the number of exploration wells drilled still fell by about a quarter from 2011 to 2012.
 
Still more worrying for future global energy supplies is the slide in reserves found per well drilled over the last three years.
 
After peaking at around 170 million barrels of oil equivalent (boe) in 2009, well above the global average, the average reserves uncovered in the Middle East slumped to around 20 million boe in 2012, according to Woodmac estimates.  
 
"We are on a downward trend, so it's a bit disappointing," Williams said. -Reuters



Tags: Middle East | Drilling | oil and gas | exploration |

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