E&P 'Yet to Focus Fully on Gas': Westwood

The upstream sector (E&P) remains wedded to oil production despite the demands for gas implied by the energy transition. Affordable quantities of blue hydrogen, lower carbon transport and quick-start power generation all rely on gas but the statistics do not show that this is the sector's main area of interest, according to analysis by Westwood published March 18.

It says the main reason is that most of the world’s E&P companies have not yet committed to reducing their scope 3 (third party) emissions, and are therefore not specifically targeting natural gas exploration as part of an energy transition strategy. 

"Forecasters of energy demand, such as the IEA, tend to project gas demand holding up for longer than oil, and a number of E&P companies include natural gas as a core part of their energy transition and net-zero emissions strategies," it says. But to the question, "Is there any evidence that explorers are now targeting more gas in exploration?" it says, "not yet. In fact, 2021 is expected to see the lowest proportion of high impact exploration wells targeting gas in more than a decade."

Overall, 32% of high-impact wells targeted gas prospects in 2011-2019. The highest proportion was in 2019 when around 45% targeted gas. And there the results were skewed by BHP in deepwater Trinidad, BP off west Africa and US Exxonmobil and Italian Eni in the eastern Mediterranean. "Oil has remained the primary target throughout the period accounting for two thirds of high impact exploration wells," it said.

In 2020, 71% (52) of high impact wells targeted oil prospects, with the focus on offshore Brazil, Suriname-Guyana, the Norwegian Barents and the US Gulf of Mexico. Only the Nile Delta saw more than three high impact wells targeting gas. Westwood is projecting that around 83% of the wells drilled this year will target oil.

Hot spots will be Mexico’s Campeche Salt Basin and Suriname-Guyana (over 10 wells each), Brazil’s pre-salt (five to six wells) and the North Sea (over 5 wells). Gas/gas condensate exploration will be concentrated in the Levantine Basin of the eastern Mediterranean; Myanmar’s Rakhine Basin; and the South Caspian. All are either close to local gas demand centres or have existing routes to market with available capacity.

And accidentally finding gas instead of oil has left the industry with more gas than it needs or can commercialise in current market conditions, it says, with about 36bn barrels of oil equivalent discovered between 2008 and 2016 still awaiting a development plan. Exploration work is now in plays where the route to market is clearer, but big gas prospects with access to an attractive gas market that can be commercialised quickly are hard to find. "Until this equation changes explorers will still tend to favour oil," says the consultancy.