Page 15 - Hydrocarbon Exploration and Production Second Edition

2 Exploration Phase

considerations will include any threat of civil disorder, the availability of local skilled
workforce and local training required, the degree of effort which will be required to
set up a local presence and positively engage the indigenous people. The company
will also consider the precautions needed to protect the environment from harm
during operations, and any specific local legislation. There may also be a reputational
issue to consider when doing business in a country whose political or social regime
does not meet with the approval of the company’s home Government or share-
holders. Finally, an analysis of the competition will indicate whether the company has
any advantage. It may be that if the company has an existing presence in-country from
another business interest, such as downstream refining or distribution, the experience
from these areas could be leveraged.
Some 90% of the world’s oil and gas reserves are owned and operated by National
Oil Companies (NOCs), such as Saudi Aramco (Saudi Arabia), Petronas (Malaysia),
Pemex (Mexico). For an independent oil company to take a direct share of explo-
ration, development and production activities in a country, it first needs to develop a
suitable agreement with the Government, often represented by the NOC.
The invitation to participate may be publicly announced, in the form of a licensing
round, as discussed in Chapter 2. Alternatively an arrangement for participation may
be privately agreed with the NOC. In order to gain an advantageous position on this
process, an oil company will expend effort to understand the local conditions, often
by setting up a small presence in-country through which relationships are formed
with key Government representatives such as the Oil and Gas Ministry, Department
of Environmental Affairs and local authorities.
The understanding of local conditions and the requirements of the country,
along with the relationships built, may result in a direct agreement for participa-
tion in the country or at least an advantageous position when a public bidding
round occurs. The investment made during the Gaining Access phase may be
considerable, especially in terms of time and the commitment of representatives – it
may take a decade of setting up the groundwork before any tangible results are seen,
but this is part of the investment process of hydrocarbon exploration and
production.

1.2. Exploration Phase

For more than a century petroleum geologists have been looking for oil.
During this period major discoveries have been made in many parts of the world.
However, it is becoming increasingly likely that most of the ‘giant’ fields have already
been discovered and that future finds are likely to be smaller, more complex, fields.
This is particularly true for mature areas like the North Sea and the shallow water
Gulf of Mexico (GoM).
Fortunately, the development of new exploration techniques has improved
geologists’ understanding and increased the efficiency of exploration. So although
targets are getting smaller, exploration and appraisal wells can now be sited more
accurately and with greater chance of success.