Tight budgets and shrinking pool of oil & gas prospects reshape search for more hydrocarbons

While the ongoing trade wars create significant uncertainty among project developers across the offshore energy spectrum, with supply chain costs bound to see another spike thanks to tariff woes, Rystad Energy, an energy market intelligence group, has pointed out that global oil and gas operators are prioritizing low-risk, low-cost near-field or infrastructure-led exploration (ILX) prospects as budgets tighten, rather than the more expensive high-risk hydrocarbon exploration plays.

Against the backdrop of the ongoing tariff tug-of-war, Rystad underlines that the oil and gas explorers have zeroed in on near-field plays as prospects shrink under the weight of increasing financial constraints, a low commodity price environment, and a declining pool of prospective basins.

These challenges have served to transform the oil and gas players’ exploration endeavors aimed at unearthing new barrels. ILX, despite not being a recent phenomenon, is said to be a reliable avenue that capitalizes on existing production hubs and pipeline networks to commercialize smaller discoveries that might otherwise remain untapped.

Furthermore, Rystad Energy predicts little growth in exploration budgets this year, which stand at around $50 billion, given that price volatility, growing sustainability pressures, and rigorous capital discipline are taking center stage. Based on the company’s analysis, Indonesia, the U.S., and Norway will emerge as ILX hotspots this year.

Aatisha Mahajan, Vice President of Exploration Research at Rystad Energy, explained: “The global industry downturn, paired with emissions regulations, high costs and scarce frontier exploration prospects, have created an unfavorable environment for greenfield exploration. The surge in ILX activity reflects a strategic push for cost-effective resource recovery, signaling a dynamic year ahead for near-field exploration.”

Rystad’s analysis highlights that the global oil and gas industry is now confined to a handful of highly prospective basins, with explorers increasingly prioritizing low-cost, near-field prospects that can deliver quick returns due to a cocktail of market challenges. The firm underlines that the conventional exploration spending has dropped from its peak of over $117 billion annually in 2013 to around $50 billion per year in recent years. 

However, ILX, unlike greenfield projects that require significant capital for standalone infrastructure, is perceived to benefit from lower development costs, shorter lead times, and reduced emissions. With the last five years boasting nearly 900 ILX wildcat wells drilled, Rystad is adamant that the strategy has so far proven to be a success, achieving a 42% exploration success rate over this period, significantly exceeding the global exploration success rate of 32%. 

Out of the 100 ILX wells planned for 2025, the company claims that Southeast Asia is set to witness the highest activity, followed by Western Europe and North America. ILX drilling is spread across four countries in the first region: Indonesia, Malaysia, Vietnam, and Thailand.

These span 15 distinct basins, spotlighting the region’s diverse ILX opportunities. While the activity in the second region is concentrated entirely in Norway, the deepwater region of the Gulf of America, formerly the U.S. Gulf of Mexico, is expected to be a major ILX hotspot in the third region this year.

“With strong success rates and substantial resource additions, ILX drilling is vital for sustaining production and maximizing infrastructure use. As the industry adapts, ILX remains a key driver of upstream exploration, enhancing efficiency and unlocking new reserves,” emphasized Mahajan.