The Energy Cliff Approaches: World Oil & Gas Discoveries Continue To Decline

As the world continues to burn energy like there is no tomorrow, global oil and gas discoveries fell to another low in 2017.  And to make matters worse, world oil investment has dropped 45% from its peak in 2014. If the world oil industry doesn’t increase its capital expenditures significantly, we are going to hit the Energy Cliff much sooner than later.

According to Rystad Energy, total global conventional oil and gas discoveries fell to a low of 6.7 billion barrels of oil equivalent (Boe). To arrive at a Boe, Rystad Energy converts natural gas to a barrel of oil equivalent.In 2012, the world discovered 30 billion Boe of oil and gas versus the 6.7 billion Boe last year:

In the article, All-time low for discovered resources in 2017, Rystad reports, it stated the following:

“We haven’t seen anything like this since the 1940s,” says Sonia Mladá Passos, senior analyst at Rystad Energy. “The discovered volumes averaged at ~550 MMboe per month. The most worrisome is the fact that the reserve replacement ratio in the current year reached only 11% (for oil and gas combined) – compared to over 50% in 2012.” According to Rystad’s analysis, 2006 was the last year when reserve replacement ratio reached 100%.

The critical information in the quote above is that the world only replaced 11% of its oil and gas consumption last year compared to 50% in 2012. However, the article goes on to say that the last time global oil and gas discoveries were 100% of consumption was back in 2006. So, even at high $100+ oil prices in 2013 and 2014, oil and gas discoveries were only 25% of global consumption.

As I mentioned at the beginning of the article, global oil capital investment has fallen right at the very time we need it the most. In the EIA International Energy Outlook 2017, world oil capital investment fell 45% to $316 billion in 2016 versus $578 billion in 2014:

In just ten years (2007-2016), the world oil industry spent $4.1 trillion to maintain and grow production. However, as shown in the first chart, global conventional oil and gas discoveries fell to a new low of 6.7 billion Boe in 2017. So, even though more money is being spent, the world isn’t finding much more new oil.

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Moon Kil Woong 1 year ago Contributor's comment

The issue is that a lot of the small drillers and oil companies are still barely able to pay their debt load. I don't believe that the ability to find oil is impossible, just that it requires a lot of Cap Ex which is why Exxon was not that eager to buy a lot in the downturn and can easily buy oil drilling assets now that oil prices are healthy again. Only the majors can play in the big oil drilling deals Shell, BP, Exxon, and the like can.

The real issue is Asian demand which is outpacing growth everywhere else. Their demand growth is not sustainable as their energy needs keep rising.

Bill Johnson 1 year ago Member's comment

This is troubling. But you yourself said that despite trillions being spent to grow and maintain production, new oil reserves aren't being found. So what's the solution?

Ayelet Wolf 1 year ago Member's comment

Invest in #solar and other energy alternatives.