Australia’s contribution to global exploration performance with the growing commercialisation of unconventional plays
Andrew LathamVice-President, Exploration Research, Wood Mackenzie
The APPEA Journal 54(3) - https://doi.org/10.1071/AJ13140
Published: 30 June 2014
Abstract
Exploration has been—usually—the best means for upstream companies to create value. On a 10-year view, conventional exploration is a highly profitable business with industry full-cycle returns of 18% at our Base price (Brent US$85/bbl). But exploration returns have declined through the period, averaging nearer 14% over the past five years. Higher discovery and development costs in recent years are part of the issue. Increased costs and long timescales are both particular issues in Australia, where returns have slipped to below the global average.
Worldwide, new field oil discoveries of more than 120 billion barrels replaced just over one-third of global production during the past decade. Australia has been easily the most important of the world’s established conventional gas plays, with over 50 tcf discovered in the past decade. Elsewhere, gas volumes have been boosted with the emergence of major new provinces in the Eastern Mediterranean from 2009 and in East Africa from 2011.
Full-cycle economics in unconventional exploration are often quite challenging. Pioneering companies that were long-established in the best unconventional plays have achieved value creation and returns on a par with the best conventional explorers. Those entering later have typically incurred high access and leasing costs and have achieved much lower returns.
Australian exploration remains an attractive opportunity. The industry, particularly the Majors, has much increased appetite for frontier exploration. Australia offers intriguing high-impact plays, such as the Ceduna Basin, that hold potential for a bright future of investment and success.
Andrew has over 20 years experience assisting majors and independents in the development of their exploration strategy and presently works on Wood Mackenzie’s Exploration Research. He provides analysis of exploration economics, strategies and industry trends and is particularly focused on forward-looking analysis and yet-to-find evaluation. Andrew previously led the Exploration Strategy offering within the Upstream Consulting business. He worked with clients to help optimise their investments in petroleum exploration and advised on strategy, process, opportunity characterization and evaluation. As part of this offering, Andrew directed Wood Mackenzie’s series of multi-client projects on exploration, deepwater and Arctic themes including Exploration Strategy and Performance and Global Deepwater Markets. Andrew has been a Principal Consultant within Wood Mackenzie’s energy team since 1995. Until the end of 2001, he managed the team responsible for Sub-Saharan Africa research products and consultancy, undertaking a range of market analysis and regional strategy projects. He started his career in 1990 as an international new ventures geologist with Ranger Oil. In this role, he focused on upstream projects outside of North America and the UK. Later, as Ranger focused on West Africa, he became project geologist for Angola. Andrew graduated from Imperial College, London, with a BSc Honours degree in Geology, and holds a PhD in Geology from University College, Cardiff. |
