SPENDING on oil and gas exploration in Australia is at its lowest level in a decade as a result of the global collapse in oil prices, a leading analyst says.
According to the March quarterly report released by independent analyst EnergyQuest, this has occurred at a time when annual production had hit record highs.
EnergyQuest chief executive Graeme Bethune said the total number of exploration and development oil and gas wells drilled in Australia had nearly halved over the course of 2015.
The number of wells fell from 1,534 in the 2014 calendar year to just 821 in 2015, with the exploration wells falling from 119 to 54.
“In that time, exploration spending fell from $1.03 billion in the fourth quarter of 2014 to $446 million in the fourth quarter of 2015,” Dr Bethune said.
Total sales revenue fell from $4.4 billion in the fourth quarter of 2014 to $3.3 billion in the fourth quarter of 2015 – which Dr Bethune said meant that $1 billion less was being spent on Australian energy exploration.
The collapsed oil price had its worst impacts off Australia’s coastline, with offshore exploration activity crashing last year to just three wells sunk – nine times lower than the 29 offshore targets drilled in 2014.
In an announcement, Dr Bethune said the drop in offshore drilling was the start of a prolonged period of low Australian offshore activity, “despite the large take up of new acreage in offshore release programs between 2012 and 2014”.
“A survey by EnergyQuest of work programs to win offshore acreage in this three-year period shows explorers have guaranteed to spend a total of $1.1 billion in the first three years – but this impressive headline figure includes only 12 wells,” Dr Bethune said.
“In addition, winning bidders loaded most of their proposed spending ($1,774 million and 43 exploration wells) into the secondary, non-guaranteed component of their work programs (years four to six of the permits).
“This effectively gives them in a low oil price environment, the freedom to severely prune their activity for as long as prices remain low.
The decline in exploration wells in onshore drilling was less steep but still serious, he said, with the number falling from 90 to 51, with big declines in all states except Western Australia, where activity in the Perth basin is proceeding.
Development drilling would be a growth area in Queensland as the companies involved looked to maintain production in order to fuel its LNG projects.
“Drilling there fell from 1,173 wells in 2014 to 612 wells in 2015,” Dr Bethune said.
“This was a natural consequence of the initial need to drill, discover and develop maiden gas flows for the commissioning cycles for the new LNG plants – but substantial numbers of additional development wells are still needed now as the plants move to long-term output.”