More than half of the world’s planned licensing rounds are likely to be cancelled this year due to the combined effects of the Covid-19 pandemic and the continuing oil price war, a Rystad Energy impact analysis forecasts.
More than half of the world’s planned licensing rounds are likely to be cancelled this year due to the combined effects of the Covid-19 pandemic and the continuing oil price war, a Rystad Energy impact analysis forecasts. New licensed offshore acreage is likely to fall by about 60% and onshore acreage by 30% compared with 2019 levels.
This year 45 countries were planning to launch at least 52 lease rounds, about 60% of them in offshore areas.
‘The unlikely upcoming lease rounds represent around 54% – a worrisome sign for global exploration. A number of factors together make these rounds unlikely to go ahead, including the oil-price drop, a global cut in investments by almost 20%, a lack of skilled manpower due to the Covid-19 pandemic, fiscal regimes that are proving unattractive in the current environment, and a lack of interest among potential participating companies,’ said Rystad Energy’s senior upstream analyst Aatisha Mahajan.
In Europe, unlikely rounds are those of the United Kingdom, Ukraine, Romania and Germany. In South America, rounds in Colombia, Brazil, Ecuador and the Dominican Republic may not go ahead, while in Asia rounds in Thailand, Uzbekistan, Myanmar and the UAE may be put on ice. New Zealand is also in doubt, and in Africa, licensing rounds in Ivory Coast, Algeria, Tanzania, Senegal, Somalia, Liberia, Ghana, Equatorial Guinea, Angola, South Sudan and Nigeria may also be put on hold.
The US, Suriname, Egypt, Russia and China make up the list of countries where licensing rounds hang in the balance and are marked as tentative. The US recently concluded its lease round 254 in the Gulf of Mexico.
The Latin American nation of Suriname, which is developing into a hotspot for global exploration with two major discoveries in recent months, is another that might be able to conclude a successful round.
Rystad has earmarked Egypt as a prospective region that could hold a licensing round because of the willingness to participate from companies with significant free cash flow. Russia and China both have local players bidding in licensing rounds there.
Licensing rounds that are also likely to go ahead in Malaysia, Trinidad and Tobago, Norway, India, Lebanon, and Canada. These countries look well on track to continue their lease rounds as scheduled, although the current industry volatility could cause slight delays. India is planning to combine the OALP (Open Acreage Licensing Policy) with Round 5&6, and these blocks will be up for grabs in July.
Canada plans to go ahead with licensing in its offshore Labrador region. Trinidad and Tobago is riding on its exploration success having discovered around 400 million barrels of oil equivalent (boe) in 2019 and is well placed with interest from the active players in the region and only a mild outbreak of the virus.
Norway intends to proceed with its annual awards in pre-defined areas (APA) round of all mature, unlicensed acreage, and has proposed adding 36 deepwater Norwegian Sea blocks.
Eight of the initially expected 52 licensing rounds have already been completed, in Barbados, Canada (C-NLOPB 2020), the US (Lease Sale 254), Gabon, Pakistan, Oman, Australia and Republic of the Congo.
‘We expect to see a large drop in awarded acreage this year compared with 2019. In percentage terms, the drop in offshore acreage could match the nearly 60% decline seen from 2014 to 2015, while awarded onshore acreage could shrink by almost one-third compared with a 16% drop after the previous downturn,’ added Mahajan.
Rystad’s analysis indicates that global awarded acreage is likely to fall below 2015 levels this year, while staying above the level seen in 2016.
