Global oil discoveries dived to a record low in 2016 as companies continue to slash spending, and the cuts are expected to keep coming this year, according to new research.
Oil discoveries dropped to 2.4bn barrels in 2016 compared with an average of 9bn barrels per year over the past 15 years, according to the International Energy Agency (IEA).
Meanwhile, the volume of conventional oil projects sanctioned was at the lowest level in more than 70 years, falling to 4.7bn barrels, or 30 per cent lower than the previous year. The number of projects that received a final investment decision dropped to the lowest level since the 1940s, the IEA said.
The slowdown is due to a decline in investment spending driven by lower oil prices. After global benchmark Brent crude reached highs of more than $100 a barrel in 2014, the price plummeted to around $30 a barrel. Prices are now hovering around $51 a barrel.
US shale boom
The conventional oil slump contrasts with the resilience of the US shale industry, which now plays a fundamental role in balancing out global supply, the IEA said.
"Every new piece of evidence points to a two-speed oil market, with new activity at a historic low on the conventional side contrasted by remarkable growth in US shale production," said Dr Fatih Birol, the IEA's executive director.
"The key question for the future of the oil market is for how long can a surge in US shale supplies make up for the slow pace of growth elsewhere in the oil sector."
Conventional oil still holds the lion's share of global oil output – 69m barrels per day (bpd) of a total of 85m bpd. Meanwhile, 6.5m bpd come from liquids produced from the US shale plays, and the rest is made up of other natural gas liquids and unconventional oil sources like oil sands and heavy oil.
With global demand expected to grow by 1.2m bpd a year over the next five years, the IEA warned an extended period of sharply lower oil investment could lead to a tightening in supplies.
Exploration spending is forecast to fall in 2017, for the third year in a row, to less than half the levels seen in 2014. This will result in another year of low discoveries.
The level of new sanctioned projects so far in 2017 remains depressed, the IEA said.
The crucial offshore sector has been hit particularly hard. While accounting for almost a third of crude oil output, in 2016, only 13 per cent of all conventional resources sanctioned were offshore, compared with more than 40 per cent on average between 2000 and 2015.