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NOCs To Slash Over a Quarter of Exploration Budgets

National oil companies (NOCs) globally are estimated to cut exploration budgets by over a quarter on average in 2020, said Wood Mackenzie.

The analysis is based on announcements and well plans for 11 top-spending NOC explorers, including three Chinese NOCs, PTTEP, Petronas, ONGC, Qatar Petroleum, Rosneft, Gazprom, Petrobras, and Pemex. Their combined original budgets may be reduced by about 26% or $5 billion, to around $14 billion this year.

Wood Mackenzie Senior Analyst Huong Tra Ho said, “Most NOCs consistently spent between 12% and 35% of their upstream budgets on exploration, an average of about 17% over the 2015–2019 period. This is significantly higher than the majors’ average spend of 8% of upstream budgets on exploration.”

NOCs with substantial international presence will prioritize domestic activity, with deeper cuts to overseas budgets. Those with constrained domestic resources could place more strategic importance on exploration.

As organically added resources contribute 50 to 70% of their production in the next decade, Petronas and CNOOC Ltd. will protect their exploration plans as much as possible.

Ho said he expects NOCs to revitalize their exploration programs as the sector recovers.

NOCs To Slash Over a Quarter of Exploration Budgets

Lynnmarie P. Flowers, Technology Editor

01 July 2020

Volume: 72 | Issue: 7

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