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Australia is relatively robust and unlikely healthy, but demand for 2015 permits to see a signifcant drop off in 2015, as will decline sharply.

many of the programs are underway Overall, it is important for companies already, are needed for contract delivery to maintain a dynamic and evolving or are essential for the continued per- exploration portfolio as a driver for future

Australian and New Zealand formance of felds that operate with low growth. However, in the current oil price break-evens and high netbacks. environment, companies will be looking

This could change heading into 2016, if for cost savings and exploration budgets a low oil price persists. The development are unlikely to be spared the axe. This offshore exploration spend more than 12 months out from is despite the bidding process involving early-2015 is likely to be more discretion- companies committing to potential explo- ary and, after a year of low prices, nothing ration spend in the future, when oil prices will be sacrosanct. This is where we have returned to higher levels. would expect more of an impact on devel-

Wells to watch opment drilling and related expenditure.

Nonetheless, there is a number of excit-

In comparison, the deferral of short- term exploration activity is a relatively ing exploration wells planned during simple way to reduce expenditure and 2015 that will be eagerly watched by one we are already seeing occur in the industry due to their play-opening potential. These include Murphy’s three-

Australia. Many companies with com- mitment wells due in 2015 and 2016 well program offshore Perth basin, and are applying to the National Offshore

Apache and Woodside’s ongoing drilling

Petroleum Titles Administrator (NOPTA, in both the shallow and deep water areas the government licensing regulator) to of the Canning basin. defer commitments. If successful, these

Like the rest of the world, what is deferrals could result in minimal explo- going to happen in Australia and New ration and appraisal activity.

Zealand over the next 12 months is very have reduced the opportunity for rigs to In New Zealand, short-term activity is uncertain. We predict that explorers drill other wells, contributing to the fall unlikely to be affected by the drop in oil will take a more cautious approach to in overall activity. price. One of the two rigs active there is improve near-term returns for sharehold-

Drilling costs have also risen dramati- being transported back to Singapore and ers. This will include a reduced focus on cally over the last 10 years. Daily rig rates the other is committed to the continua- frontier exploration, and an increased have increased signifcantly, along with tion of development drilling. The rig is appetite for short-term and high value rises in both service company and logistics scheduled to remain in New Zealand once opportunities. costs. This has seen companies be more that development drilling is complete for

Matt Howell is circumspect with their drilling decisions, an exploration well. That said, this well

Analyst, Upstream even in the higher price environment that could be considered in jeopardy, depend-

Research, Australasia. has until very recently been evident.

ing on the funding position of the compa-

He joined Wood nies involved.

New oil price environment

Mackenzie’s research

Longer term

The environment in which oil compa- team in August 2011. nies operate changed signifcantly in late We are yet to see if the appetite for new

Prior to that he 2014. The low oil price quickly impacted exploration in the longer-term will be worked for Baker company capital plans, with both devel- affected. An early litmus test could

Hughes as a wireline feld engineer and in opment and exploration budgets cut glob- be upcoming license rounds offshore the company’s geoscience arm. Howell ally. The level of development drilling off Australia, traditionally a core area of holds a Bachelor of Engineering (Hons) deepwater exploration for the majors. degree in Oil and Gas Engineering and a

While the plunge in prices may test

Bachelor of Commerce, majoring in appetite for blocks that are either in deep

Accounting and Corporate Finance, both water or on the fringes of existing plays, from the University of Western Australia.

on the other hand acreage can potentially

Angus Rodger is now be acquired through competitive

Principal Analyst, bidding with a far lower work commit-

Upstream Research, ment than in previous years.

Australasia. Rodger

The low price will have a signif- joined Wood cant impact on the block bidding level.

Mackenzie’s South

Analysis reveals there is a very strong

East Asia Upstream correlation between oil price at the research team in May timing of bidding and the popularity of 2008. Rodger holds a BA (Hons) degree in rounds and hence the number of permits

Politics with International Relations from awarded many months later. This would the University of Warwick.

suggest that bids for 2014 blocks will be oedigital.com March 2015 | OE 57 056_OE0315_Geo2_WoodMac.indd 57 2/22/15 3:33 PM