New figures published by the International Energy Agency show that global oil discoveries fell to a record low of only 2.4 billion barrels in 2016, while sanctioned projects fell to their lowest levels in over 70 years.
The 2016 slowdown is due to reduced investment spending, driven by low oil prices, and represents a trend the IEA believes could continue throughout this year.
According to the International Energy Agency (IEA), oil discoveries declined to 2.4 billion barrels in 2016, compared to the previous average over the last 15 years of 9 billion barrels a year. Further, the IEA reported that “the volume of conventional resources sanctioned for development last year fell to 4.7 billion barrels,” a 30% drop over the previous year’s number, with the number of projects receiving final investment decision falling to the lowest levels seen since the 1940s — a time when, you maybe remember, the world was either in the midst of a World War or recovering from one. The total global oil output reached 85 million barrels per day (MB/d), made up of 69 MB/d from conventional oil production, 6.5 MB/d from liquids production from US shale, and the rest coming from natural gas liquids and unconventional sources such as oil sands and heavy oil.
The IEA lays the blame for these historic lows at the feet of decreased investment spending driven by low oil prices, and warn that this trend could continue into this year, especially when you take into account the “heightened geopolitical risks” in important producer countries such as Venezuela.
“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.”
The IEA raises concerns that this current trend could lead to a tightening of global oil supplies. The IEA has predicted that global oil demand will increase by 1.2 MB/d a year over the next five years, and that “an extended period of sharply lower oil investment could lead to a tightening of supplies.”