Straight talking was something I urged industry leaders to do a year ago in this magazine. “Speak up!” I said. “Tell us what you really think, and don’t play it safe.”

Refreshingly, this year there have been a number of VIPs wanting to get things off their chests. We might not agree with all they say, but who cares? At least they now appear to feel sufficiently unshackled to give honest views without fear of censorship. This brutal downturn has finally loosened tongues.

The European Association of Geoscientists and Engineers annual meeting, held this year in Vienna, Austria, saw some of the world’s leading explorationists speak up.

Eni’s CEO Luca Bertelli said deep water would be the main source of future large discoveries, but he didn’t duck the elephant in the room—we’re not finding enough oil and gas. He bluntly described the E&P sector as having been “in crisis” well before the price fell. “If we look back at this cycle, we had the lowest number of discoveries in 50 years. Last year we discovered even less because global exploration was cut by 30% on average.” With a lack of big finds over the past three years, he said, it was clear that “there was already a crisis in exploration. And then the price slump came.”

He also told delegates not to expect high oil prices to return, describing the price levels of recent years as “an anomaly” and hammering home the fact that despite prices having plunged about 50%, average E&P costs have fallen by only 25%. It needs to fall plenty more, he said.

Ceri Powell, Shell’s executive vice president of global exploration, agreed on the importance of deep water, stressing that with it producing only 7% of the world’s oil, it was still an immature play with 270 Bbbl of estimated recoverable reserves. But she also acknowledged today’s stark reality—globally there will be “74% less wells drilled in 2016 compared to 2014” onshore and offshore.

Tim Dodson, Statoil’s executive vice president exploration, added, “Most of us are starting to struggle with our resource base. Not our actual numbers but what makes them up. It’s an area of some concern. They are at the wrong end of the cost curve. There’s an absolute need for the likes of us all to explore, but the fundamental challenge is of delivering sufficient volumes.”

He didn’t leave it there, saying that anyone who thought oil companies could replace their significant production levels by exploration alone “was living in dreamland.”

All of the speakers gave governments some stick as well, with more exploration incentives required. Dodson commented, “There are big reserves out there that will not be developed because there’s not enough cake left for us.”

To hear such VIPs speak openly and specify—no, demand—the required actions is a true tonic for the ears. Keep it up!

Comments