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Global oil, gas exploration likely to return to profitability in 2017

Oil&Gas Materials 9 December 2016 14:57
The global oil and gas exploration is likely to return to profitability in 2017 after five years of only single-digit returns.
Global oil, gas exploration likely to return to profitability in 2017

Baku, Azerbaijan, Dec.9

By Leman Zeynalova – Trend:

The global oil and gas exploration is likely to return to profitability in 2017 after five years of only single-digit returns, according to a new study of Wood Mackenzie, a global energy, metals and mining research and consultancy group.

"The industry has a good chance of achieving double digit returns in 2017. Smarter portfolio choices and lower costs are already paying off,” Andrew Latham, vice president of exploration at Wood Mackenzie said.

Wood Mackenzie's analysis of the 2017 global exploration outlook shows that the oil and gas exploration in 2017 will continue its transformation to a smaller, more efficient industry.

Overall investment will at best match 2016 year’s spend of around $40 billion, and may yet fall further, according to the report.

Wood Mackenzie expects Brent crude oil price to rise sharply from 2019, averaging $77 per barrel in real terms for the year.

If this happens, then recovery in exploration spend will follow a year or two later, said the consultancy group.

“The industry has cut exploration deeper than other upstream spending. Its share of upstream investment will dip to a new low of just 8 percent in 2017,” said the report. “An eventual return to historic norms – around one dollar in seven – depends on oil price recovery.”

"After a decade in the doldrums, the majors' returns from conventional exploration improved to nearly 10 percent in 2015. The rest of the industry is heading in the same direction. Fewer, better wells promise a brighter future for explorers," Latham added.

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Follow the author on Twitter: @Lyaman_Zeyn

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