A New Strategic Agenda for E&P

Abstract

With crude oil prices down nearly 25% since June – when oil & gas companies were already strained by numerous industry challenges and increasingly active shareholders, conversations in the oil patch are converging on the same range of topics and with an increased sense of urgency.

Conventional discovery volumes are in decline and there are fewer numbers of large fields. Moreover, the volumes are higher cost and lower value than in the past – more deep-water, more gas, and more unconventionals. The year 2013 marked the lowest level of conventional oil and gas discovered in decades, and conventional discovery volumes in 2014 look set to be about 30% lower again.

A decline in conventional exploration accentuates the impact of other factors such as less quality and difficulty with access. Oil and gas companies are producing high quality, conventional barrels, but increasingly having to replace them with lower quality barrels (higher cost, more risk, poor reservoirs, heavy oil or harder to commercialize natural gas). Moreover, overspending in North American (NA) shale has driven down returns – the industry is pursuing higher cost resources globally.

As prices continue to soften, oil and gas companies must respond to these trends and changes in the industry with a new strategic agenda, described herein.

Keywords: Oil, Oil & Gas, National Oil Company, Integrated Oil Company, Petroleum, E&P

JEL Classification: L71, M20, Q30