[Editor’s note: Be sure to check out our look at the top oil and gas stories that shaped 2018 from Dec. 26 and the year’s top deals from Dec. 28. Following the New Year, we’ll look at the top trends to watch in 2019 on Jan. 2.]

The market downturn that prompted a spending and activity slowdown left the oil and gas industry’s exploration sector bruised coming into 2018. But slashed budgets didn’t kill oil and gas exploration.

With spotlights consistently on record-setting production from U.S. shale plays, evolving completion recipes and emerging digital technologies in the oil patch, companies with eyes on future energy demand continued searching for hydrocarbons both onshore and offshore.

Momentum kept going in the U.S. Gulf of Mexico, where Royal Dutch Shell used its offshore expertise to make discoveries. These included the deepwater Whale discovery—a Paleogene find in the Perdido area—and the Dover discovery in the Norphlet geologic play.

Exxon Mobil Corp. and partners added more chapters to their exploration and development story unfolding offshore Guyana. The team announced five more discoveries in the Stabroek Block this year, bringing to the total count to 10 with more than an estimated 5 billion barrels of oil equivalent in discovered resources.

Improving oil prices, efficiency and fiscal discipline also gave companies the confidence needed to move forward with developments like those in the Permian’s Delaware Basin where Apache Corp. is developing Alpine High and Devon Energy is seeing “monster” wells.

Hart Energy spoke with Stephen Beck, upstream senior director for Stratas Advisors, about how 2018 shaped up for oil and gas exploration and development in the U.S. and other parts of the world. Here are his thoughts, which have been edited for length and clarity, on 2018 and what the future could bring for the industry.

Hart Energy: Looking back to January, what were your expectations for oil and gas exploration and development activity and did those expectations play out as anticipated?

Beck: My expectations back in January were for a little more than $100 billion spending in North America and I had to make some upward revisions because it came in stronger than I expected. The stronger activity was centered in three core areas. The first was the Permian. The number of rigs added to the Permian exceeded—not by a large number—but were marginally higher than I was estimating at the beginning of the year, and that was driven mostly by the Wolfcamp. It didn’t go much higher than I expected mainly due to some infrastructure constraints and flaring limits. But it was higher nonetheless.

The second area that came in stronger than anticipated was the Scoop area in Oklahoma and that was driven by substantial increases by Continental Resources targeting the Springer Shale. In May, I was modeling an increase in rig counts by Continental on a somewhat steady upward trajectory, but the company announced it more than doubled the number of rigs basically mid-year and going into August.

The last area that wasn’t as much of a surprise: the Powder River Basin. A number of companies really started to become more active. It reinforced what my views were on the Powder River from January.

Hart Energy: What was the biggest exploration story of the year in your opinion and why?

Beck: The biggest exploration story of the year was the Permian. It’s really a big deal, much bigger than people thought early on in the plays. And the reason why it’s such a big story is really due to the fact that the U.S. has fundamentally rebalanced the global supply system, and it’s driven by the Permian.

I just spoke in Bahrain and the key thing that I said was there are three core inputs that matter in a global crude oil supply system. The first one is the resource base. If you look at the Permian, it has produced over 5 billion barrels in its history and there is another 5 billion barrels plus in the future for the Permian. Now we don’t have all the technologies figured out to do all that development economically today— nor do we want to—but the chief consideration here is that the Permian has a massive resource base. The second criteria is technology that opens up the resource to competitive prices in the global economy, and the Permian clearly has a seat at the table for that. The last is the proximity to markets, or the ability to transport the product to end consumers.

Russia and the Middle East are also bound by these three criteria, and there is a somewhat of a balance between the three regions that are competing today.

Hart Energy: How was 2018 for offshore exploration?

Beck: When it comes to the traditional areas offshore—being the Gulf of Mexico, the North Sea—I’d say the Gulf of Mexico has been somewhat sanguine. People are doing what they can, but there’s no real enthusiasm. It’s still going to take a little bit more time for the Gulf of Mexico to return, but it will in time in my opinion.

In the North Sea, there’s been a number of rounds of bidding and that was [results were] surprising. People still are finding ways to keep the North Sea viable. I don’t think it grows per se, but there’s definitely some resiliency in the North Sea that I think will continue into coming years.

Guyana and Brazil are going to continue in terms of what was seen in 2018. There were some very positive announcements made, and I think that those will continue next year.

Hart Energy: Were there any technology or other trends that emerged during the year?

Beck: In terms of offshore, the key thing with technology is the evolution toward more standardized solution sets. Think of it as Lego sets on the offshore platform. Companies that are operating offshore, particularly the IOCs, are looking at ways to move away from one-off, tightly engineered solution packs to more of a modular approach—things that can be manufactured and then snapped together much like Legos. And it’s not just for 2018; it’s an effort that has been underway for a number of years.

In terms of onshore and with unconventional, what we’re seeing is the migration of technology from North America to other regions of the world. Primarily, we’ve seen the first shale wells being announced in Lancashire, U.K., as well as Bahrain, and we continue to see development and expertise technology transfer to the Vaca Muerta in Argentina and to China. So that is exciting. We’re early in the international shale game, but there will be ongoing efforts to make inroads in these areas.

Hart Energy: Looking forward, what exploration hot spots could be in store next year?

Beck: In North America, I think the Powder River Basin is one of those hot spots followed by Oklahoma, specifically the Anadarko Basin and the Scoop/Stack. Globally, I expect more announcements out of Brazil, and we’ve had significant announcements out of Guyana from Exxon. That’s something to pay attention to in 2019 as well. Lastly, I’ll say with Anadarko and Eni moving forward with key projects in Mozambique, that’s something to continue watching in 2019.

Velda Addison can be reached at vaddison@hartenergy.com.

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