Global Exploration Outlook to 2050: How to Meet Future Energy Needs?

In today's rapid global transition to clean energy, undiscovered oil and gas reserves remain important
to meet future energy needs.
Conventional oil and gas exploration, in particular, will remain critical to uncovering gaps in oil and gas reserves that meet future demand, even after oil demand peaks
.
Over the next 30 years, the share of unproven reserves in future supply will rise, and global conventional exploration spending is expected to reach $1.
7 trillion
by 2050.
With policy changes and a push to achieve net-zero emissions, the outlook for global liquid demand has changed, and in this scenario, Wise Energy believes that existing oil fields and discoveries are not sufficient to meet future demand
.
In this review, Rystad Energy will analyze the additional proven reserves required under two different oil demand scenario assumptions: the mean scenario and the sigma+ scenario
.

The average demand scenario is the long-term oil demand trajectory that Wise Energy believes is most likely
.
In this scenario, global oil demand is expected to reach and slightly exceed the 2019 level of 99 million b/d in 2022 and then peak at 103 million b/d in 2024, which is 4 years ahead of the forecast for 2020, after which oil demand will remain stable until the end of the decade and then to 50 million b/d
in 2050 。 Several key assumptions associated with this scenario are: (i) electric vehicle adoption is reasonably lower than current EV manufacturers' targets; (ii) plastic recycling rates for certain plastic products reach the recycling level of aluminum cans and glass by 2050 (about 75 percent);(iii) about 30 percent of the original petrochemical feedstock for certain plastic products will come from green hydrogen by 2050; and (iv) oil substitution in other industries will develop
under current decarbonization policies.
These assumptions correspond
to the global warming scenario of 1.
8°C.

The high-demand scenario corresponds to a slow energy transition and slow
decarbonization.
Under this scenario, global oil demand peaks at 105 million b/d in 2026 and falls to 74 million b/d
in 2050.
Some key assumptions for this scenario are: (i) the adoption of electric vehicles is slow, and in non-OECD countries, consumers face more resistance due to inadequate charging infrastructure and a boom in the used fuel vehicle market, and demand for oil will last longer; (ii) the recovery rate of plastics is linearly increasing, with less recovery rates than glass or steel; and (iii) the rate of oil substitution in the power generation industry has not accelerated
significantly compared to historical decline rates.
This corresponds to a global warming scenario of 2°C
.

Under the assumptions of both scenarios for WiseTech, the share of unproven reserves in future supply will rise from about 3% in 2030 to about
30% in 2050.
The importance of exploration and discovery of new reserves is therefore self-evident
.
These reserves also include old discoveries that have been shelved for decades, with little
likelihood of future mining and development.
Therefore, future exploration will also need to offset these lost reserves
.

Under the average demand scenario, untapped finds could supply 204 billion barrels of oil
in 2021-2050.
Further analysis based on the age and current status of the discovery, Wise Energy found that about 44 billion barrels of reserves are at high risk and may not be available
.
This includes all findings obtained before 1990 that do not have a development plan defined, and they account for about
22 per cent of the current projected supply of resources in the category of "discoveries".
Similarly, Wise Energy forecasted in a high-demand scenario where oil prices are higher than average demand scenarios, and Wise Energy believes that more findings will be commercial, meaning that the share of risky reserves will fall to around 18% (see Figures 1a and 1b
).

Figure 1a: Global Liquid Supply and Demand Projections 2020-2050 (under average demand scenarios)

Million barrels per day

Figure 1b: Global Liquid Supply and Demand Forecast, 2020-2050 (under the High Demand Scenario)

Million barrels per day

In addition to risky and uncertain proven reserves, future exploration drilling must provide a significant supply of liquids through new discoveries to meet demand forecasts
for 2021-2050.
In the average demand scenario, Wise Energy estimates that these new discoveries will require the supply of approximately 76 billion barrels of liquid, while under the high demand scenario, the required supply is expected to increase to about 113 billion barrels
.
Therefore, under the assumption of these two different demand scenarios, the cumulative new proved reserves required to meet demand increase to about
120 billion barrels and 160 billion barrels, respectively.
Looking ahead to the global conventional exploration potential, these reserves come from two main sources: one is the further evaluation of existing fields and resources, and the other is new discoveries (see figures 2a and 2b
).

Figure 2a: New proven reserves needed to meet global demand, 2021-2050 (under the average demand scenario)

Billion barrels

Figure 2b: New proven reserves needed to meet global demand, 2021-2050 (under the high-demand scenario)

Billion barrels

Source 1: Resources discovered through the evaluation of existing fields

Such assets include projects in the early stages of production, projects under development and risk-free reserves in discovered assets
.
Wise Energy expects that some future exploration activities will carry out reservoir zoning and improve estimated resource reserves, while technological improvements and other secondary oil production technologies will also increase recoverable reserves
.

Under the average demand scenario and the high demand scenario, it is currently expected that projects in the above categories will contribute approximately 265 billion and 300 billion barrels of liquid supply (see Figures 3a and 3b)
respectively over the period 2021-2050.
Regal Energy expects that through future exploration, including enhanced oil recovery technologies, these fields will have upgraded reserves, which is about 5%, equivalent to about
15 billion barrels.
This leaves the reserves gap of 105 billion barrels and 145 billion barrels in the average demand scenario and 145 billion barrels in the high demand scenario, to be discovered in the future by exploration drilling in areas that are not currently proven – the second new source
of supply for the Wise Energy forecast.

Figure 3a: Cumulative recoverable liquid reserves in the early production phase and future projects, 2021-2050 (under the average demand scenario)

Million barrels/year

Figure 3b: Cumulative recoverable liquid reserves in the early production phase and future projects, 2021-2050 (under the high-demand scenario)

Million barrels/year

Supply Source 2: Obtained through new discoveries

Oil and gas companies' strategic shifts, demarcation of core areas, cuts in exploration capital expenditures, and complexity with the development of large new discoveries have all led to a significant decline
in new proven reserves for conventional exploration each year compared to the beginning of the previous decade.
An analysis of new proven reserves for conventional exploration in 2010-2021 shows that 72% of the reserves were announced in 2010-2015, suggesting a decline
in the scale of discoveries over the years.
Over the past decade, the average proven reserves per discovery have been around
40 million barrels.

By the end of September, the global new proven liquid reserves in 2021 were slightly more than 4 billion barrels
.
Wise Energy expects that in the future, the new proven liquid reserves for global conventional exploration will be stable at about
4 billion barrels per year.
Given the average size of the discoveries, explorers are required to announce at least 100 new conventional discoveries per year to maintain the expected annual new proven reserves
.
As in the past, not all new proven reserves during this period will be developed and produced, many of which may not be put into production
.
Therefore, the cumulative new proved reserves need to be much higher than the required cumulative liquid supply
.

In order to derive the approximate yield of future new oil and gas discoveries, Wise Energy studied variables such as the proportion of production from new discoveries over the past three decades and the time
it takes to go from discovery to commissioning.
Since 1990, approximately 780 billion barrels of new proven liquid reserves have been added worldwide, and approximately 20% of reserves have been utilized by 2020 (see Figure 4).

Due to the rapid development and exploration of oil discoveries and foreground areas near existing infrastructure, project lead time may be shortened, and the time between discovery and commissioning will be reduced
.
Assuming a 10% reduction in project lead time, in the average demand scenario and the high demand scenario, explorers will need to discover approximately 350 billion barrels and 480 billion barrels of new proved reserves, respectively, by 2050 to produce the 105-145 billion barrels of liquid supply
required over the next 30 years.

Figure 4: Cumulative new proved and utilized reserves from 1990 to 2020

Million barrels

While conventional oil and gas resources will continue to dominate supply, some of the demand will need to be met
by unconventional resources.
Given the existing sources of unconventional oil and gas supply, as well as the growing momentum for the development of unconventional resources in places such as the Middle East and China, Wise Energy believes that 60% of the new proven reserves required by 2050 will need to be supplied through conventional exploration, equivalent to 210 billion barrels and 300 billion barrels
in the average demand scenario and the high demand scenario, respectively.

To minimize the cost and time required to meet expected future demand, the discovery of these new reserves requires both capital investment and a willingness to take risks to make large new discoveries
.
In estimating the conventional exploration expenditures required to meet oil demand over the next 30 years, Wise Energy considers the following factors:

The global exploration success rate has fallen sharply, from about 51% in 2010 to 16%
in 2020.
Since "easier" hydrocarbons have already been discovered, it will become increasingly difficult
to discover large numbers of new resources in mature areas.
However, due to the more concentrated exploration, the exploration success rate may rise
.
Therefore, in this paper, Wise Energy assumes that the global average exploration success rate for 2021-2050 is about 30%, which means that about 300 exploration wells
need to be drilled per year.
Considering that most of the new proven reserves will be located offshore, the average cost per well is about $40 million, and the annual exploration expenditure is $12 billion
.

Assuming an average of 4 billion barrels of proven reserves per year in the future, it would take about 50 and 75 years, respectively, to discover the reserves needed to meet the expected demand under the assumptions of the above two demand scenarios
.
Assuming an exploration success rate of 30%, cumulative drilling expenditures would reach around
$600 billion and $900 billion respectively in the average demand scenario and the high demand scenario to meet demand.
However, it is important to note that under the scenario of high oil prices and low decarbonization, exploration activities will increase significantly and will not take the number of
years mentioned above.

In addition to drilling, the discovery of these reserves will require expenditure
in geological and geophysical studies, block lease fees and contracted deposits paid for future block tenders.
Historically, the ratio of drilling expenditure to other exploration expenditures has been 52:48
.

Based on these assumptions, Wise Energy estimates that cumulative exploration expenditures for 2021-2050 are $1.
2 trillion and $1.
7 trillion for 2021-2050, respectively, under the average demand scenario and the high demand scenario, excluding the investment
required to increase reserves through increased drilling and enhanced recovery.
But these figures are based on historical assumptions, and exploration will need to be accelerated in the future, because at this rate, it will take more than 50 years
to provide the new proven reserves needed to meet demand.

Figure 5: Conventional exploration under the average demand scenario and the high demand scenario

Rystad Energy is a business consulting firm focused on the energy industry, providing data, analytical tools, research reports and consulting services
to customers related to the energy industry worldwide.
Founded in 2004 and headquartered in Oslo, Norway, the company currently has more than 30 branches and offices
worldwide.
Two branches were established in China, one in Beijing and one in Shanghai
.
The official name of Rystad Energy Chinese - Rystad Energy
.

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