Exploration off the table: O'Neill

WOODSIDE Petroleum has cut deeply into its exploration budget in recent years, which once stood at US$400 million per year, and now may not pursue exploration at all.

 Pluto, one of the plants that will need backfill this decade

Pluto, one of the plants that will need backfill this decade

"This was ramped down considerably over time," CEO Meg O'Neill said today. 

US citizen O'Neill joined in 2018 when the company had already moved on from exploration and was focussed on finally commercialising legacy finds Scarborough and Browse. 

In early 2018 the company undertook a US$2.5 billion equity raising to progress development, as well as get its oil project offshore Senegal up and running.

All were fully appraised discoveries and in the case of the two Australian fields, decades old. 

For O'Neill in the traditional hydrocarbon space there is plenty of room to develop the assets Woodside takes when the merger with BHP's petroleum arm completes next year, pending shareholder vote. 

She wants to focus on "assets with a rapid pathway to commercialisation". 

"Where we explore needs to be with a clear pathway to commercialization...the oil  industry has a track record of technical success and the commercialization side takes tremendous time," she told analysts today after outlining the company's growth strategy at an investor briefing this morning. 

"Scarborough is a good example…we can't have 40 years to commercialise." 

The last wildcat Energy News can recall it participating in was a non-operated 30% of an oil project called Khan Kubrat, run by Shell offshore Bulgaria in the Black Sea, in 2019. 

Then CEO Peter Coleman said it was the best thing his exploration managers had brought him. It was a duster. 

At this year's PESA Deal Day, a platform for companies to find dance partners held a day ahead of the APPEA conference proper, a Woodsider explained a 100% owned permit it holds, and that his company was searching for a partner. 

Presumably if it is giving up on exploration it may need a conversation with the titles regulator over its possible work program commitments, unless its exploration team is already sure it can be commercialised. 

However, this also suggests that however Woodside chooses to keep the North West Shelf full as its fields deplete, it won't be via a new exploration campaign. 

Whatever assets already exist within Woodside's portfolio or more likely in a third party's, will have to head there. O'Neill said as much during a prior analyst call in November after sanctioning development of the Scarborough field. 

At the last investor day the company said it expected to shut in Train 3 by 2024. The company has also more recently written down the reserves at its share of Wheatstone, and Pluto. It will need third party gas for the latter's first train this decade also. 

Exploration campaigns traditionally aren't undetaken to find backfill but more generally to replace reserves longer term. The low spend on exploration in recent years by the industry as a whole has worried analysts, and in the mid-term is seen as one of the catalysts for $100 per barrel oil. 

On Monday, Adelaide consultancy EnergyQuest said in its December report that "all of the existing projects (Australian LNG projects) are likely to have exhausted their Proved and Probable reserves by 2050". 

The North West Shelf could be done in just seven years, Wheatstone six years after that in 2033, and Prelude and Darwin (including Barossa) by 2044; while Ichthys, Gorgon and Pluto/Scarborough by around 2050. 

How Woodside will replace its reserves is now less clear. 

Recommendations from the International Energy Agency that in order to meet 2050 emissions targets no new oil and gas fields should be developed is a recommendation activists have taken to heart. 

In Australia they have attacked Woodside for sanctioning the Scarborough project, but it may yet be the last of its kind if Australia's largest oil company gives up on finding more oil or gas. 

A growing series of reports, each focused on a key discussion point for the energy sector, brought to you by the Energy News Bulletin Intelligence team.

A growing series of reports, each focused on a key discussion point for the energy sector, brought to you by the Energy News Bulletin Intelligence team.


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