Independent explorers set to continue leading oil frontier charge: analyst
London (Platts)--3Oct2012/807 am EDT/1207 GMT
Independent oil and gas companies will lead the charge in exploring new
frontier basins in the future, having already outpaced the majors over the
past five years in terms of exploration success, a senior analyst at UK-based
consultants Wood Mackenzie said Wednesday.
Speaking at a conference in London, Woodmac head of corporate analysis
Simon Flowers said companies such as the UK's Tullow Oil, Sweden's Lundin
Petroleum and the US' Noble Energy had made some of the world's most
significant finds in recent years.
"Independents have led the way in finding large exploration plays in
recent years," Flowers said.
He pointed to the success of Tullow and Dallas-based Kosmos Energy
offshore Ghana, which he said had led to the "rapid move" into the region by
international majors, and the success of the US' Anadarko Petroleum and its
partners in finding gas in the Rovuma Basin offshore Mozambique.
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Tullow and its partners have also made a major oil find offshore French
Guiana, which Flowers described as "one of the hottest spots on the planet."
Flowers added that it is not just in frontier basins where independents have
led the way, pointing to the giant Johan Sverdrup oil field now being
developed by Lundin, together with Statoil, in the mature Norwegian North Sea
Exploration success by small- and mid-cap companies has meant they have
been able to replace their reserves far more effectively than the majors,
"Lundin, Tullow, Noble -- they have all had massive reserve replacement
success over the past five years," he said.
By comparison, the majors have struggled to replace their reserves, with
only Italy's Eni and Statoil achieving 100% reserve replacement rates through
"Others have replaced their reserves through acquisition," Flowers said.
Some independent companies are also expected to achieve huge production
growth by the end of this decade, Flowers said.
As well as significant growth from the likes of Tullow and the UK's
Premier Oil, Flowers said Anadarko was a good example of how an independent
company can translate exploration success into production growth.
"Anadarko's output could exceed 1 million b/d of oil equivalent by 2020
from 500,000 boe/d now," he said.
"They have a diverse stream of production coming from different sources
-- from unconventionals in the US, deepwater Gulf of Mexico, Brazil and
Ghana," he said.
He said output growth would be achieved even as Anadarko sells some of
its other assets.
Selling assets has given Anadarko the financial clout to move to new
exploration plays, which in the US company's case resulted in the huge gas
finds offshore Mozambique.
"Its exploration success is critical -- from 2006 to 2010 it made six
discoveries of more than 200 million barrels plus in six different plays,"
International majors are also expected to increase production to 2020 as
they catch onto the pull of new exploration frontiers.
"Majors have the scope to spend more on exploration, though investment
remains modest relative to their size," he said.
He said companies such as Total, BP and ConocoPhillips had underspent on
exploration in recent years, which is why their reserves replacements rates
have been low.
"But they will be spending more and their reserves replacement will
improve... as they enter deepwater hotspots," he said.
"Majors have been on a massive land grab recently, hoovering up frontier
The majors will also likely step up their corporate acquisition activity
in the near future, Flowers said.
"Independents are dominating new frontiers," he said, citing the
Falkland Islands, Ghana, Sierra Leone, Cyprus, Kenya and Uganda as examples.
"Big oil will use M&A to capture first movers," he said.
Of the next big frontier basins, Flowers pointed to little known rift
basins, mostly centered on Africa.
"There are dozens of these -- such as the Angola interior, onshore
Zambia and Namibia, the Somali-Ogaden basin in Somalia and Ethiopia, and the
Central Burma Tertiary," he said.
Flowers said these basins were still attracting smaller independents, in
these cases the likes of Afren, Africa Oil and Frontier Resources.
Companies of this size are likely to continue to appeal to the
governments of such countries, as they would be more focused than a major
"And they have first mover advantage -- majors typically don't like
taking the first risk."
--Stuart Elliott, email@example.com
--Edited by Alisdair Bowles, firstname.lastname@example.org