As the U.S. shale oil boom matures, Big Oil is doing something it hasn’t done in years: increasing global exploration outside the Americas. In the most high-profile recent move, Chevron On February 11, he announced his return to Libya after an absence of 15 years.
After two decades of downturn in global oil and gas exploration, Frontier exploration is rebounding. The industry’s largest producers have cut spending on costly global efforts as they lean toward the Permian Basin in West Texas and other U.S. onshore basins, as well as proven offshore basins including the Gulf of Mexico.
For context, the decision proved to be a wise one: The shale gas boom—horizontal drilling coupled with hydraulic fracturing—turned the United States from a country that produced 5 million barrels of oil a day 20 years ago to a world-leading oil power producing nearly 14 million barrels a day and even exporting nearly 5 million barrels a day.
This makes Chevron, Exxon MobilCompanies like these are taking their foot off the metaphorical gas pedal globally and focusing more on actual oil and gas drilling at home. With U.S. shale oil production now likely to have peaked and plateaued, or even entered a slight decline, the pendulum has swung back again.
Global exploration is recovering from historic lows, so progress remains incremental but is clearly rebounding, said Patrick Rutty, director of Enverus Intelligence Research.
“Given recent drilling successes and waning concerns about peak (oil) demand, the industry is reprioritizing exploration, a dynamic that will push resource capture to relatively high levels over the next five years,” Ruti said. He added that the risk of global oil shortages later in the decade remains as short-term demand continues to rise.
Another reason for the lull in global exploration is continued predictions that global oil demand will eventually peak and begin to decline by the end of the century as the world shifts to electric vehicles and other cleaner fuel sources. But while demand growth has slowed, it is still rising, and shortages now look like the greater short-term risk.
This is especially true because U.S. shale wells tend to dry up more quickly than conventional wells after a few years of producing large amounts of oil.
Return to the frontier
So Big Oil is taking action now.
In a telling sign, war-torn Libya issued exploration licenses to international companies for the first time in nearly 20 years. In addition to Chevron, Italy Enispanish Repsoland others were issued new licenses.
Chevron, which withdrew from Libya in 2010 during a period of severe political unrest, is now returning to the country.
“Libya has significant proven oil reserves and a long history of producing resources,” said Kevin McLachlan, Chevron’s vice president of exploration. “Chevron believes its strong track record of developing oil and gas projects and its technical expertise position it well-positioned to support Libya in further developing its resources.”
Chevron said the deal reflects its growing focus on the Eastern Mediterranean region of North Africa and the Middle East. Chevron is also expanding its operations in Egypt, Cyprus and Turkey.
During the earnings call on February 10, blood pressure its offshore drilling work Libya is “the most talked about exploration well in the industry right now.”
Chevron is also negotiating a possible return to Iraq. In October, ExxonMobil also signed an agreement to return to Iraq.
Chevron Chairman and CEO Michael Wirth highlighted global exploration momentum during a Jan. 30 earnings call. He said there was a general rise in interest from countries wanting U.S. companies to invest in the extraction of their resources.
“It’s been a decade or more since we last took a really hard look at Libya. These things are changing,” Voss said. “The resource potential of some of these countries is undeniable. Iraq and Libya are two of the largest resource holders in the world.”
By far, Chevron’s largest oil production hub is the United States, which accounts for nearly half of its total output. Next up is its leadership in Kazakhstan.
After getting Hess Last year, Chevron became the leader in the emerging oil power offshore Guyana with revenues of $53 billion. The company is participating in a new, Forced to cooperate with competitors ExxonMobil first discovered oil in Guyana a decade ago – arguably the largest oil discovery of this century. But such major discoveries are increasingly rare in mature industries.
The question is whether that will change as exploration heats up again in South America, Africa and other so-called frontier areas. In South America, international investment is increasing in Brazil, Argentina, Guyana’s neighbor Suriname, and now, Guyana’s other neighbor Venezuela may also be affected by the Trump administration. is exerting control over its oil industry.
Exxon Mobil Chairman and CEO Darren Woods touted the company’s efforts during an earnings call in October.
“As the (U.S. shale oil) depletion curve emerges, the industry has to continue to think long-term and invest and find resources. I think you’re seeing that now,” Woods said. “People see this resource and its promise and are moving toward longer-term, longer-term projects. We’ve never lost sight of that.”