Have you ever wondered what it takes to be an oil and gas explorer, or how they think about the world? In a series of articles on Exploring the Explorer I have been putting a focus back onto these professionals to give insight about them as people and their careers in exploring for oil and gas deep below the land and ocean floor.
Today’s insight summarises the views of some experienced explorers on what it takes to generate success in an exploration company.
Getting to the top - Priekestolen, 2019
7) Critical success factors for exploration
“Go out to sea, drill a big hole, bingo, sorted!” is the well-known cartoon caption summarising how to succeed in exploration, followed by “I think you’ve rather over-simplified our strategy Watson!” Reality is not so simple, and exploration is a lot riskier than most people would think. A high-impact (>100mmboe) frontier exploration prospect with higher than a one-in-four chance of commercial success is usually in the top tier of a portfolio, but these prospects are increasingly harder to find and pursued by a decreasing number of companies.
Exploration success in 2022
According to Westwood Energy, high impact drilling in 2022 remained at a similar level to 2021, with 81 high impact wells completing (Figure 1) and an overall commercial success rate improving to more than 1 in 3, partially driven by the success of emerging plays in the Suriname-Guyana basin. In terms of frontier exploration drilling, activity remained low in 2022. Only 19 frontier wells completed, from which there has been an exceptional 1 in 4 commercial success rate with five potentially play opening offshore discoveries in Namibia, Colombia, Indonesia and Morocco.
Figure 1) Map showing potentially commercial high impact discoveries estimated to be greater than 100mmboe in 2022 (Source: Wildcat, Westwood Energy Insight, 12 January 2023)
High impact drilling appears to remain the preserve of national oil companies and large international oil companies, with CNOOC, ExxonMobil, Hess, TotalEnergies and Shell ranking in the top five of active explorers (Source: Westwood Energy)
So, what are the critical factors to be successful in exploration?
Explorers’ views on the keys to success
In a small survey I polled some seasoned explorers from the oil and gas industry to find out what they think are the critical success factors to be successful in exploration and the results are summarised in the chart below.
Responses to “What are the critical success factors in terms of corporate culture to have success in exploration?” (n=48)
This survey indicates that the top five critical success factors for an exploration company are:
- Strategic clarity
- Teamwork
- Creative freedom
- Courage/failure tolerance
- Portfolio management
Explorers thrive with the support of a clear strategy showing them what the company wants to achieve and why it is important, hence strategic clarity is number one. A clear strategy gives focus and drives teams to seek the relevant opportunities and to choose the best of them for drilling.
The remainder of the top five critical success factors are all concerned with the ‘way of working’ to execute strategy. Essentially these cover the ‘How’ element, after the ‘What’ and ‘Why’ elements of strategy have been defined.
Working together as a team in a creative environment is ideal because we know that explorers have a strong desire to develop new ideas from available data and at the same time, they generate tremendous amounts of positive energy by collaborating in teams. Explorers, however, also understand that sober portfolio management is essential to identify potentially commercial candidates for more detailed evaluation and potential risk funding.
At the end of the identification and definition cycles, senior decision-makers need to have the courage to make decisions and approve very significant risk money for exploration drilling. Their decisions, and of course the exploration team’s recommendations, will then be tested through the drill bit, or ‘rotary lie-detector’ as well engineers sometimes like to call it. Fortune favours the brave as the old saying goes, but often exploration wells result in commercial failures.
For a reality check, the 2018 Westwood Energy report ‘Frontier Exploration - How many wells does it take to prove a frontier play?’ indicated that for frontier plays it takes on average more than 2 exploratory wells prior to a commercial discovery and can often be more. A real cold-eyed tolerance for failed wells leading up to commercial success is something that perhaps only hands-on experience can develop. However, as Westwood also state in their article, there is a fine balance between persistence and knowing when to stop.
The other factors identified in the responses to this survey reflect the need for technical focus and additional, supportive, cultural qualities from senior management, such as empowering and trusting people in their teams. Success in exploration management depends a lot on encouraging your teams do what they do best to build up your opportunity portfolio and provide a rich supply of choices. Leadership may often request a ‘quality portfolio’, however this should not mean the miraculous provision of a basket of winners, but rather the term ‘quality’ should mean providing plentiful alternatives to choose from.
First and foremost, senior leaders have the obligation to develop a clear strategy roadmap, with short, medium, and long-term targets, and to stick to it. There can be the temptation to make constant changes to strategy based on short term events, or even worse choosing not to have a strategy at all and replacing it with a series of changing targets. In these cases, the results will be dissipation of focus and teams continually wasting time and effort. The most successful companies will be those with the courage to maintain and implement their longer-term strategy and the ability to unleash technically creative teams.
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