Global oil discoveries hit record low in 2016, says IEA

Global oil discoveries declined to a record low in 2016 as companies continued to cut spending, following the steep fall in oil prices, Paris-based International Energy Agency said on Wednesday, warning that the trend could continue this year.

Oil discoveries dropped to 2.4 billion barrels in 2016, compared with an average of 9 billion barrels per year over the past 15 years.

The IEA, which monitors energy trends for industrial countries, also noted that conventional oil projects sanctioned in 2016 were at the lowest level in more than 70 years.

Meanwhile, the volume of conventional resources sanctioned for development last year fell to 4.7 billion barrels, 30 percent lower than the previous year, as the number of projects that received a final investment decision dropped to the lowest level since the 1940s.

Exploration spending is expected to fall again in 2017 for the third year in a row to less than half of 2014 levels.

With global demand expected to grow by 1.2 million barrels per day (bpd) a year in the next five years, the agency has cautioned that an extended period of lower oil investment could lead to a tightening in supplies.

Investment in US shale industry, however, grew as production costs were reduced by 50 percent since 2014.

"Every new piece of evidence points to a two-speed oil market, with new activity at a historic low on the conventional side contrasted by remarkable growth in US shale production," said Fatih Birol, IEA's executive director.

Liquids production from US shale companies is expected to expand by 2.3 million bpd by 2022 at current prices, and expand even more if prices rise further, the agency said. 

Crude prices crashed from the June 2014 peak of above $100 a barrel (bbl) to $27/bbl in January 2016, as global inventories swelled, driving oil companies to reconsider expenses and scale back investments.

In December, the Organization of Petroleum Exporting Countries (OPEC) struck a deal with other major exporters, including Russia, with each participant agreeing to limit production for six months starting January in a bid to rebalance supply and demand and prop up prices.

Write to Nadeshda Zareen at nadeshda.zareen@argaamplus.com