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A new era for oil and gas exploration

Posted by: James Cant

The price of oil has rebounded with Brent Crude now trading above $70 and signs are that the industry is in recovery, following a tough few years. Oil and gas supply has eased off, demand is robust, and inventory levels are finally eroding.

With Oil demand growing, and investment in many major projects having been deferred during the downturn, there is less potential supply available and oil companies will now need to explore their options for upscaling production, to avoid being faced with a supply crunch. 

Exploring the upstream sector 
Globally, upstream capital expenditure, which dropped by nearly 45 per cent between 2014 and 2016 is now forecast to rise by 6 per cent year-on-year in the medium term.  Oil and gas rig activity levels are rising, driven by the North American market and some significant projects are being approved, for example, BP went ahead with the second phase of Mad Dog, a floating production platform, in the Gulf of Mexico. 
The sector still faces supply related challenges, and there is an ongoing decline in new discoveries. By the end of 2017, the volume of oil and gas discoveries was at its lowest since the early 1950’s with only 3.4 billion barrels of liquids (crude, condensate, and natural gas liquids) being discovered in 2017, this number equates to meeting just 10 per cent of demand and it’s getting harder to find large discoveries, also known as “elephants”, as most prospective areas have already been explored. 

However, exploration is slowly beginning to rise again for the first time since the global recession of 2014-16 and is forecast to recover modestly over the near term at 7 per cent compound annual growth rate. An example of this growth is the numerous companies who made bids in the Mexican Deepwater auction, with Shell, Eni, Chevron, and Repsol picking up acreage.

An evolving talent profile
Operators also face the challenge of the gap that exists between the expanded capabilities they need, and the diminished capabilities they have. Productivity efficiencies and workforce reductions made during the downturn to save money has resulted in lost technical skills and has damaged the industry’s ability to attract new talent. In addition to this, a large proportion of the sector’s ageing workforce are due to retire over the next decade.

The industry’s talent profile is changing, by leveraging advanced digital technology such as predictive maintenance and drones to inspect offshore platforms, new opportunities have begun to open, encouraging a new generation of tech-savvy workforce to the industry whilst, also reducing workers’ exposure to hazardous tasks. Thus, improving the industries health and safety record. Traditional disciplines such as subsurface and surface engineering will still be important, but they must be balanced against new demand for expertise in digital operations. As companies build their capabilities in software engineering and data science, for example, senior executives in talent management will need to balance technical (engineers) and technological (data scientists and software engineers) roles and how the sector can attract the latter. 

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