Oil explorations hit bottom of last 60 years

10 May 2016 14:37 (UTC+04:00)

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By Fatma Babayeva

Discovery of new oil reserves has declined to its lowest level over last 60 years which can be evaluated as a sign of potential lack of supply in the coming decade, the Financial Times reported on May 8.

IHS consultancy reported that as result of oil explorations in 2015, 2.8 billion barrels of crude and related liquids were discovered, which is the lowest recorded volume since 1954.

The root reason for that is the slowdown in the exploration works carried out by the energy companies who fall short of cash due to low oil prices in the market.

Subsequently, it can lead to the reduction of the oil supplies in the global market from mid-2020s, which in turns, will push the oil prices up.

Moreover, global energy research and consultancy company Wood Mackenzie reported that if the situation does not improve, the global market will experience shortfall of around 4.5 million barrels of oil by 2035.

The company further added that the exploration expenditures will plummet from $95 billion in 2014 to $41 billion in 2016 by emphasizing that the decrease in the number of the discovered oil fields does not mean that the world is running out of oil. The increase in oil production observed during the recent years comes from the existing fields not the newly found ones.

Discovery of Zohr field in Egypt by Eni and Greater Torture complex field in Mauritania and Senegal by Kosmos Energy are the biggest finds of 2015.

In general, investing in exploration and development of new oil and gas fields are not lucrative for energy companies when prices of these commodities are low in the market. Particularly, E&P in offshore fields are abandoned by many companies due to higher costs of the works conducted in these fields.

Worth noting that the shale oil production in the U.S. which has high lifting cost has also faced the decline due to the falling prices the “black gold”. Although companies are looking for ways to improve their cost efficiency and technologies, experts believe it will be hard for them to survive in this business if oil remains at current price levels for a long period.

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Fatma Babayeva is AzerNews’ staff journalist, follow her on Twitter: @Fatma_Babayeva