It is fitting that Italian oil company Eni would go hunting for massive oilfields, known as “elephants” in industry jargon, in Côte d’Ivoire, until now a distinctly second-tier West African oil producer.
Success at the deep-water Baleine field in September 2021, which the company now says holds 2.5 billion barrels of oil and 3.3 trillion cubic feet of gas, won it “Explorer of the Year” from consultancy Wood Mackenzie. Not just a matter of one lucky corporation and nation, this shows a trend in petroleum exploration: the super-majors are back.
In the early 2000s, significant new hydrocarbon provinces were opened up by scrappy junior companies, such as Cairn in Rajasthan and Hardman in Uganda. In the following decade, success attended mid-size, better-funded large independents, such as Kosmos in Ghana and Mauritania-Senegal, and Noble Energy in the Eastern Mediterranean.
Swedish group Lundin, whose patriarch Lukas Lundin died last month, uncovered the huge and surprising Johan Sverdrup oilfield in Norway.
UK-Irish Tullow Oil won the Wood Mackenzie accolade between 2009 and 2013 for a string of finds in Ghana, Uganda and Kenya, Large US independent Anadarko was awarded it in 2014 and 2015 for massive deepwater gasfields off Mozambique.
But since then, three super-major oil companies have dominated the prize-giving: Eni from 2016 to 2018 and in 2022, ExxonMobil in 2019 and TotalEnergies in 2020 and 2021.
Equinor, the Norwegian government company, was perhaps unlucky not to feature for its share in Johan Sverdrup and its gas finds off Tanzania from 2012 to 2015. ExxonMobil’s success rests on its industry-leading oil discoveries in Guyana.
But the claims for Eni and TotalEnergies are more widespread. Eni gains credit for Zohr in Egypt (2015), which single-handedly turned around the country’s gas industry, Mahani in Sharjah in January 2020, and now two sizeable gas discoveries in its offshore Abu Dhabi block, as well as Baleine, Madagascar and Mexico.
TotalEnergies' past success encompassed the UK, Suriname (next to Guyana), Cyprus and South Africa. The French champion looks a good candidate to win next year as well, because of its colossal Venus discovery in world-record water depths off Namibia, in partnership with Lundin’s Africa Oil subsidiary.
Shell, not historically the luckiest explorer, might have a shot with its Graff find in the same country. The past five months of this year may also yield another surprise, most likely in Africa or South America.
Since their heyday, the smaller exploration companies have struggled on three fronts.
Sterling success was followed by strings of high-profile failures: Cairn, for instance, ploughed its funds from selling out of India into expensive flops in Greenland. Brazil’s HRT was perhaps unlucky or too early: three wells in Namibia found tantalising signs of petroleum in 2013 but nothing commercial.
In contrast to ExxonMobil’s continuing success, Tullow’s luck seems to have dried up: it reported an unsuccessful well in Guyana on Friday.
Second, the smaller companies could not negotiate the interminable timescales, complex project management, fund-raising and local politics required to develop the discoveries.
Tullow found oil in Uganda in 2013 but sold out of the country in 2020 and buyer TotalEnergies has only just approved development of the fields, which require a long, complex cross-border pipeline for export.
A decade after exploration started, Tullow might finally be approaching approval of its Kenyan fields and is trying to sell a stake to ONGC Videsh and Indian Oil, two Indian government companies.
The early successful explorers in Iraq’s Kurdish region have clung on but profitability has been tough amid political wrangling. Cobalt went bankrupt when it failed to reach terms with Angolan state corporation Sonangol for its finds in the country. Cairn was hit with a massive back-tax bill from the Indian government. Several promising finds in the remote Falkland Islands by smaller UK-listed players remain undeveloped.
Third, these companies increasingly found it impossible to access new capital, their problems sharpened by the oil price crash in late 2014 and climate-conscious investors turning away from petroleum.
With the general industry downturn, their old model of selling on promising prospects to the majors at a premium ceased to work. American companies devoted most of their budgets to onshore shale development rather than "wildcatting", industry jargon for drilling test wells in unexplored areas.
Other potential rivals were the national oil companies. But the Chinese and Russian champions have never been very successful outside of their home grounds, with the exception of a couple of significant finds in Iraq and China National Offshore Oil Corporation’s share in ExxonMobil’s Guyana block. The Middle East players and Brazil’s Petrobras have likewise mostly concentrated on their massive domestic resources.
There are a couple of interesting exceptions: Kuwait Foreign Petroleum Exploration Company has enjoyed success in Malaysia and Indonesia. And Qatar Energy has cropped up in partnership with Shell, Eni and TotalEnergies in Namibia, South Africa, Cyprus and, less successfully, Guyana.
Other than this, the ground has been cleared for the western majors to dominate. It may be that their advantage in supercomputers, much touted by TotalEnergies, Eni and BP, have been decisive. They also benefit from their weight in pushing aside political and environmental obstacles to developing their finds and are not held hostage by a single unfriendly government.
However, some interesting trends are emerging: the super-majors’ big new finds are nearly all in deep water, where their technical and financial strengths show and political complications are less.
After years when they could find only gas, oil is back on the menu. Exploration is highly selective, concentrating on proven areas and a handful of the most prospective new frontiers. US super-major Chevron, for example, has hardly found anything outside of its Gulf of Mexico back garden, which is also the happiest hunting ground for Shell and BP.
The big oil companies will seek low-carbon, high-margin barrels. After repeated accusations of “underinvestment”, big new finds outside the Opec+ framework and Russia’s gas grip are important to bridge supply gaps.
Even if the age of the buccaneers is over, the vagaries of geology mean smaller, bold explorers will still sometimes hit the headlines.
Robin M Mills is chief executive of Qamar Energy and author of The Myth of the Oil Crisis