Energy Firms Pivot to Exploration to Secure Future Supply
Energy giants are returning to oil exploration to replenish reserves as production plateaus. Executives at CERAWeek say organic growth is now essential.
Global energy giants are pivotally returning to their core business: the search for new oil and gas reserves. Executives at the CERAWeek conference in Houston recently signaled an end to years of underinvestment in exploration, driven by the realization that production in the United States' Permian Basin is expected to plateau while global energy demand continues to rise. In recent years, the industry prioritized shareholder returns through dividends and buybacks, influenced by the shale boom and the rise of renewables. However, the depletion of existing fields and geopolitical instability—including the conflict involving Israel and Iran—have underscored the urgency of securing new resources. Francisco Gea, executive managing director at Repsol, S.A., noted that the industry must prioritize replacement strategies that were largely ignored five years ago.
But we need to start thinking about how we are going to replace the current production in the coming years.
The scale of the challenge is significant. According to Vicki Hollub, CEO of Occidental Petroleum Corporation, the industry has been replacing less than 25% of its annual production, a sharp decline from the mid-20th century when replacement rates were five times higher than production.
Efficiency and speed are now the primary focuses for major players. In Norway, EQUINOR ASA is working to reduce the time between discovery and first oil to just two or three years. CEO Anders Opedal explained that internal approval processes are being streamlined to handle projects in batches.
I will not now personally approve one project at a time. I will approve six to eight in a batch.
Exxon Mobil Corporation is also prioritizing speed, factoring production timelines into its initial decisions to enter exploration blocks. The company aims to reach a production level of 5.5 million barrels per day by 2030, building on its massive 11-billion-barrel discovery in Guyana. Similarly, BP p.l.c. is maintaining a disciplined approach to its project inventory.
Were very disciplined in which projects we invest capital in, and which we bring forward first.
BP recently announced 12 discoveries, including the Bumerangue find in Brazil, alongside successful explorations in Egypt, Namibia, and Angola. Other majors are facing similar pressure to find breakthroughs. Shell plc anticipates a potential output shortfall of up to 800,000 barrels per day over the next decade as older fields mature. The company is currently evaluating projects in Venezuela.
The shift toward organic growth comes as the pool of impactful M&A opportunities shrinks. While Chevron Corporation recently boosted its reserves through the acquisition of Hess, CEO Mike Wirth has emphasized that reviving exploration is a focus. In Italy, Eni S.p.A. is targeting over 850,000 barrels per day of organic growth
