International drilling and production: Growth outside the U.S. continues at measured pace

In the wake of continued ripples from Russia’s invasion of Ukraine, various regions around the world have been spurred to conducting greater levels of oil and gas development and production. Yet, activity is still slow to fully recover from the pandemic shutdown, and according to the Baker Institute at Houston-based Rice University, analysts are still looking for a true return post-Covid.  

The number of wells drilled last year reached 40,879, up 11.6% from the incredibly low total of 36,630 wells in 2021, Table 1. Notably, all eight regions worldwide posted drilling gains. For 2023, the Baker Institute suggests China’s reopening is a key point to consider in 2023, along with the risk of recession to the U.S. and EU, and how these two elements may interact in the coming months. The EU response to Russia’s invasion of Ukraine also continues to affect future activity. Current analytics suggest a market beginning to stabilize, as OPEC opts to watch the market pan out, and the U.S. looks to regain its lost supply momentum. 

Given the aforementioned factors, along with World Oil’s surveys of international petroleum ministries and departments, our editorial staff forecasts 2023 E&P activity outside the U.S., as follows: 

• Global drilling, excluding the U.S., will increase 9.0%, Table 1. 
• Global offshore drilling is forecast to gain 14.7%, with gains expected in every region, Table 2. 
• Canadian drilling will rise 13.9%, while Mexican drilling will be up a solid 8.7%. 

• Drilling growth will be led by the Middle East, South America, Africa and North America. 

Meanwhile, after gaining 1.6% during 2021, world crude and condensate production (Table 3) ramped up its recovery in 2022, averaging 80.849 MMbpd, up 4.4%. Yet, it still hasn’t regained pre-2020 numbers, and was nearly 2.0 MMbopd less than the 2019 figure.   

NORTH AMERICA  

Outside the U.S., both Canada and Mexico expect to generate increases in oil and gas production during 2023. Canada has plans to become a major player in the global LNG sector upon the completion of several new projects. With new discoveries and additional well activity across various oil fields, Mexico will continue its slow, measured path toward a revival of its oil production. World Oil projects this region’s drilling activity to increase 13.7%. Offshore drilling will be up 8.6%. Oil production, excluding the U.S., was up 1.9% at 6.273 MMbpd.  

Canada. Operational results in Canada during 2022 and early 2023 have been good for producers. Revenues and profits are up, because oil prices are higher. The upstream industry is beginning to see capital come back into Canada, due primarily to the war in Ukraine. Europe is looking for more secure gas supplies, and Canada is seen as secure and reliable. 

In addition, Alberta’s Provincial Premier, Danielle Smith, is seen as someone who understands the industry and will promote favorable policies.  But keep in mind, the previous points are tempered by the industry’s complete lack of trust in federal Prime Minister Justin Trudeau.  

We expect Canadian drilling (Fig. 1) to improve 13.9%, overall, with offshore work gaining 66.7%, all of the latter occurring offshore Newfoundland and Labrador. Canadian oil production is estimated to have increased 2.0%, to 4.502 MMbpd. For more details, please go to the full Canadian forecast article. 

Fig. 1. Canadian drilling should rise 13.9%, reaching its highest level in at least six years. Image: Chevron Corporation.

Mexico’s upstream sector should remain active in 2023, with private companies boosting their activities. But there will be challenges, and one of these is rig availability, which is very tight. The National Hydrocarbons Commission expects state company Pemex and private operators to increase their drilling during the first half of 2023. The back half of the year remains uncertain. 

Early this year, Pemex said it is targeting a full-year natural gas production average of 4.67 Bcfd in 2023. If achieved, it would be up 20% from the 3.88-Bcfd average of third-quarter 2022. This growth is expected to come from new fields, such as Quesqui and Ixachi, Pemex said in its 2023-2027 business plan, released at the end of 2022. 

Last September, PEMEX announced the launch of an additional two producing wells at the Ayatsil shallow-water field. Assignment A-0032-M-Ayatsil is located off the coast of Campeche in the Gulf of Mexico, around 120 km from Ciudad del Carmen, It borders PEMEX’s top-producing Ku-Maloob-Zaap (KMZ) field cluster.  

We expect Mexican drilling to increase 8.7% during 2023. Offshore drilling will rise 4.6%. Mexican oil production averaged 1.764 MMbpd during 2022, up 1.6%. 

SOUTH AMERICA

In South America, activity is forecast to be up 14.8%. Brazil will provide the bulk of offshore growth, as further development in deepwater fields takes place. Additional exploration and development will take place in the Guyana-Suriname area. Argentina will set the pace for onshore activity. Last year, the region’s oil production averaged 6.155 MMbpd, up 8.3%. 

Brazil’s new administration, under the leadership of President Luiz Inácio Lula da Silva (Lula), will rely on state-owned companies to drive economic growth. The country’s oil giant, Petrobras, has a new CEO, who says he will begin to focus on energy transition and renewables. Still, Brazil remains a significant oil producer and exporter, developer of fields, and explorer, with 18 new discoveries made in 2022.  

Further development in deepwater fields is taking place, and this means more FPSOs are entering Brazil’s offshore, Fig. 2. In January, MODEC confirmed that a new FPSO, Anita Garibaldi MV33, arrived in Brazil to prepare for work for Petrobras. It will be installed at Marlim field in the Campos basin. It will be capable of processing 80,000 bopd and 7 MMcmgd. The new vessel will be hooked up to 43 wells, with peak production scheduled for 2026.  

Fig. 2. Further deepwater development offshore Brazil means that additional FPSOs will join the fleet of vessels like this one already operating for Petrobras. Image: Petrobras.

The MV33 is the second of two FPSOs that are part of the Marlim and Voador revitalization project, which will replace nine platforms operating in Marlim and Voador fields. The second FPSO is called Anna Nery, and it is scheduled to start production during first-quarter 2023. In addition, MODEC said it would start operating the FPSO Almirante Barroso MV32 during 2023 for Petrobras at Buzios field.   

World Oil foresees drilling to increase 13.7% in Brazil. The country’s oil production rose 3.5% last year, to 3,009 MMbpd.  

Argentina. Oil and gas production, combined, is said to be at an all-time high in the country. Oil production, alone, hit its highest point since 2008, averaging 626,100 bpd. However, a lack of equipment and transportation opportunities is limiting the country’s potential for growth. Billion-dollar investments into infrastructure and commitments to unconventional oil and gas production from the Vaca Muerta shale are needed to maintain activity.  

Meanwhile, TotalEnergies has approved the final investment decision for its Fenix gas development, 60 km off the coast of Tierra del Fuego in southern Argentina. Fenix field will be developed through three horizontal wells, drilled from a new unmanned platform in a 70-m water depth. The gas will be transported through a 35-km pipeline to the TotalEnergies-operated Véga Pleyade platform and treated onshore at the Rio Cullen and Cañadon Alfa plants. 

World Oil predicts an 11% drilling increase throughout Argentina for 2023. 

Guyana and Suriname. The production potential of the Guyana-Suriname region remains enormous, thanks to the prolific Stabroek Block offshore Guyana, which holds roughly 20 Bboe. ExxonMobil operates the block, and the company expects their seven new discoveries to increase activity and boost the area’s economy. Indeed, ExxonMobil’s fifth field project offshore Guyana, Uaru is expected to produce up to 250,000 bpd, once development is approved and conducted, and the FPSO is installed. The country also expects new exploration campaigns, as the nation begins bidding rounds for 14 offshore blocks.  

In Suriname, APA Corp. (Apache) last August made its first oil discovery in Block 53 offshore Suriname. The Noble Gerry de Souza drillship drilled the Baja-1 well in 1,140 m (3,740 ft) of water and to a subsurface depth of 5,290 m (17,356 ft). The well intersected 34 m (112 ft) of net oil pay in a single interval in the Campanian formation. 

As of last August, there were three drilling platforms operational offshore Suriname, said state firm Staatsolie. Two drilling vessels were active in Block 58, conducting both exploration and appraisal drilling. Also, in Block 42, Shell last fall driled an exploration well. The company is evaluating results of the Zanderij-1 wildcat,  as it considers further exploration activities in the area. The well was drilled with the Maersk Voyager drillship to the north of Block 58. Block 42 partner Hess said that Zanderij-1 demonstrated a working petroleum system and encountered an oil pay but did not provide additional details. 

World Oil predicts a 3.3% increase in Guyana’s drilling. The country’s output jumped 190.6% last year, to 340,000 bopd. In Suriname, Staatsolie says drilling will be up 20.4%. Offshore wells will be nearly flat at six. Suriname’s oil output was 16,833 bpd during 2022.   

Colombia. As the country’s new administration vows to focus on renewable energy, oil and gas production from the region is expected to slowly decrease. Nevertheless, various exploration wells were prepped and drilled toward the end of 2022. Colombia also has identified several exploration prospects for 2023. The country will rely on gas imports to avoid a natural gas shortage. World Oil anticipates drilling to increase 11.5%. Oil production during 2022 was nearly flat at 750,000 bpd. 

Venezuela. Global sanctions have negatively impacted Venezuela’s production and drilling activity since 2019. However, the U.S. granted permits to Chevron in November to resume oil output in the country and export that oil to the U.S. In tandem with a prisoner swap in October that included several oil executives, tensions may ease and allow for increased activity.  

It is estimated that Chevron’s projects could increase production by 200,000 bpd. However, the country will continue to be impacted by sanctions that keep production and drilling activity low. That said, World Oil predicts drilling activity to increase 19.6%. Venezuela’s oil production averaged 708,000 bpd during 2022, up 11.3% from the 2021 level. 

WESTERN EUROPE 

Western Europe is facing an energy crisis on the heels of Russia’s invasion of Ukraine. As such, the region will rely heavily on assets on the Norwegian Continental Shelf in particular, and in the North Sea in general. A major gas discovery in the Netherlands may yield as much as 50Bcmg, bridging the gap caused by Russian sanctions.  

The UK will turn its focus towards renewables and energy efficiency while continuing production and exploration in the North Sea. World Oil foresees an increase in drilling activity 20.4% in 2023.  

Norway’s rich assets will prove incredibly valuable as the European Union relies on the country to fill in gaps caused by sanctions on Russian gas supplies. And the country’s exploration results are adding to those assets. The Norwegian Petroleum Directorate (NPD) reported that as of mid-February, several discoveries had already been made offshore Norway. 

On Jan. 18, NPD announced a gas discovery near Aasta Hansteen field in the Norwegian Sea. Well 6605/1-2 A proved a 12-m gas column in the uppermost sandstone layer, the NPD stated. Preliminary estimates put the size of the discovery between 2.0 and 11 MMcm of recoverable gas, with potential tie-in to Irpa field. 

On Feb. 9, an oil and gas discovery near Troll field in the North Sea was announced by NPD. Well 31/1-3 S encountered an 80-m gas column, and an oil column of around 50 m. Preliminary estimates placed the discovery’s size between 2.7 and 7.4 MMcm of recoverable oil equivalent, the NPD highlighted. The licensees may consider tying the discovery into existing infrastructure in the Troll area. 

On Feb. 10, NPD site announced an oil find near Ivar Aasen field in the North Sea, noting that well 25/10-17 S encountered a 3-m oil column. Preliminary estimates put the find’s size between 0.5 and 1.4 MMcm of recoverable oil equivalent. NPD said the discovery is not profitable at present. 

In late December, oil and gas began flowing once again from Equinor’s Njord field, Fig. 3. Resumption of output followed an extensive upgrading project to add 20 years to the asset’s lifespan. Meanwhile, Equinor in mid-December began pumping oil from the second phase of its giant Johan Sverdrup development, boosting output from Europe's biggest producing field by at least 185,000 bpd. The entire Johan Sverdrup field is now onstream. Johan Sverdrup will plateau at 720,000 barrels of oil per day, potentially increasing to 755,000 per day, and equal to 6% to 7% of Europe’s daily oil demand. Norway’s oil production was down 5.1% in 2022 at 1.685 MMbpd, but these projects and others should ensure an increase for 2023. 

Fig. 3. In late December, oil and gas began flowing once again from Equinor’s Njord field, Fig. 3. Resumption of output followed an extensive upgrading project to add 20 years to the field’s lifespan. Image: Equinor, by photographer Even Fløgstad.

Aker BP also submitted 10 plans for development across the Norwegian Continental Shelf and the North Sea. World Oil expects Norway’s drilling to increase 13.3%.  

United Kingdom. The U.K. continues to experience resource scarcity and price uncertainty in the wake of Russia’s invasion of Ukraine a year ago. As such, the area will continue to focus on boosting domestic activity as well as renewables, to gain energy security. Already, figures from the government show domestic gas production during first-half 2022 was 26% higher than for the same period in 2021. 

More help could come from additional new gas developments. For instance, Victory field, for which Shell gained control in October, could easily be tied into the existing Laggan-Tormore pipeline. The field is estimated to hold 179 Bcfg.  

In response to the energy crisis, the United Kingdom lifted a ban on shale fracing to increase production. Officials also opened up a new licensing round to allow operators to explore in the North Sea. The North Sea Transition Authority in October began a process to award more than 100 licenses to companies in the area. Almost 900 locations are being offered up for exploration. This round is the first since 2019-2020, and it will run until the end of June. 

While we are initially forecasting a 20.8% drilling gain in the UK, the hike in the EPL from 25% to 35% implemented last November may begin to discourage additional North Sea investment. The job cuts implemented by Harbour Energy in January are an obvious warning sign, as is the 25% reduction in North Sea spending announced. Thus, our forecast for British growth might have to be reduced. The nation’s oil production slipped 5.4% last year to 765,000 bpd. 

Others. One other thing to say about Western Europe—the fears over an energy shortage, principally natural gas, have altered thinking in some countries, at least temporarily. For instance, in Denmark, World Oil was told two years ago that the country had probably seen the last of its drilling offshore. And yet, they have reversed course and say there will be three new wells offshore this year.  

Similarly, Italy had declared an end to offshore drilling, but the Ukraine situation and a new administration have brought a new policy directive to encourage drilling for gas offshore. And Germany is doubling its drilling this year, almost all onshore. Finally, independent operator Parkmead in January, stuck an onshore gas discovery at the LDS-01 well in the Netherlands which encountered gas columns in the primary target horizons. The well is now ready for tie-in to production. It is the first of a two-well campaign. 

EASTERN EUROPE 

We predict that Eastern Europe and the FSU will be the global laggard this year, with drilling up just 4%.  This is due mostly to Russia, where activity will slow down from 2022’s pace. The region’s drilling activity is affected by Russia’s invasion of Ukraine. Global sanctions from the West are forcing the country to find export opportunities in Asia. However, Russia’s slowing volume of drilling will be offset partially by better gains in other parts of the FSU. Regional oil production was up slightly last year at 13.041 MMbpd.    

Russia. In response to price caps on Russian crude oil and products imposed by the Group of Seven, Russia threatened to reduce oil production by as much as 700,000 bpd. This threat is in sharp contrast to the production increase the nation experienced during the second half of 2022. Indeed, the country did follow through and cut output by 500,000 bopd in early February.  

The nation’s invasion of Ukraine has caused industry giants such as ExxonMobil to abandon activity. As Western nations explore ventures outside of the region, Russia is still exporting oil and gas to Asian countries. While it dominates the region, Russia will be hard put to post more than a 3% increase. The loss of export destinations in Western Europe and other places has reduced operators’ need to quickly develop new reserves, thus putting a cap on drilling levels. In addition, the situation is made worse by supply chain issues and a shaky Russian economy.  

Ironically, some analysts looking at nationwide data say that Russia had its best drilling year in 10 years during 2022. Well starts were up 7%. This year, World Oil predicts that Russian drilling will eke out a 3.3% gain. Since hitting a post-invasion low of 10.05 MMbpd last April, Russian oil production rebounded to around 10.9 MMbpd at the end of 2022 and stayed close to that level in January. For all of 2022, Russian output averaged 10.808 MMbpd.  

Other FSU. Outside of Russia, Kazakhstan’s production stalled, due to a gas leak that occurred in a gas separation unit during August at Kashagan oil field in the northeastern Caspian Sea. However, quick repairs allowed operator Eni to restore output fully by early November. Meanwhile, Azerbaijan is developing new gas fields that will increase production alongside existing fields, Fig. 4. A new production platform from bp also will boost oil output from the Caspian Sea. bp is expecting first oil from the Azeri Central East (ACE) platform at the Azeri-Chirag-Gunashli group of offshore fields in the Azerbaijani sector of the Caspian Sea at the beginning of 2024. World Oil expects the FSU republics outside Russia to boost drilling 10.9%. Oil production from these countries slipped 5.1% last year, to 2.636 MM bpd. 

Fig. 4. Azerbaijan’s development of new gas fields will increase production alongside existing fields offshore. Image: Socar.

AFRICA

Egypt continues to increase production prospects with new gas discoveries, while Angola struggles to replace oil exports to China that were lost to Russia. Meanwhile, Libya and Nigeria are struggling to keep up amidst political tensions, pipeline theft, and limited infrastructure. In the North, natural gas power generation has begun in Chad, thanks to production increases. World Oil anticipates drilling in the region to increase 13.7% during 2023. Regional oil production decreased 4.5% last year, to 6.557 MMbpd. 

Angola is looking for destinations for its crude exports that originally went to China yet were replaced by Russian supplies. Nevertheless, Angola faces a more optimistic economic outlook, with increased production and new discoveries driving down the country’s public debt 28% and increasing the oil and gas sector’s GDP by 2.2%. A fresh discovery was made in Block 15 (ExxonMobil) for the first time since 2003, where a redevelopment program is set to add 40,000 bpd of new capacity. In total, Angola added more than 750 MMboe to reserves during 2022. By 2026, the country plans to add 140,000 bopd to daily production. World Oil anticipates a 17.8% increase in drilling. Angolan oil output rose 4.4% during 2022, to 1.179 MMbpd. 

Egypt is poised to become a regional natural gas hub, with major discoveries and continued drilling fueling the country’s growth into 2023. There were 53 discoveries (42 oil, 11 gas) made in 2022, adding over 3.82 Tcfg to existing reserves. Recent acquisitions of concessions and blocks by operators could promise more. Meanwhile, production in 2022 totaled 27.8 MT of crude and condensates and 50.6 MT of natural gas. World Oil expects drilling to increase 7.4% this year. 

Nigerian production increased to 1.59 MMbopd by year’s end. Despite debt increases and the persistent threat of pipeline theft, Nigeria is still encouraging new investment, with contracts for drilling and flared gas use, as well as seven new offshore blocks for bidding in first-quarter 2023. World Oil projects drilling to increase 30.0% in 2023, with drilling in the new Nasarawa area to begin as early as March of this year. Nigerian oil production fell 14.4% during 2022, to 1.541 MMbpd. 

Libya continues to struggle back to old production numbers amid political tension, aging infrastructure, and terrorism concerns. Even so, production jumped from 600,000 bopd during summer 2022 to 1.2 MMbopd by the end of 2022, with ambitions to grow that number to 3 MMbopd in the next three to five years. As such, World Oil expects a 19% increase in drilling. Libyan production averaged 1.030 MMbopd in 2022, down 16.8%. 

Senegal. The FPSO Léopold Sédar Senghor is scheduled to be delivered by MODEC to operator Woodside Energy during first-half 2023, Fig. 5. The vessel will be installed at Sangomar offshore field. In addition, the FPSO vessel for the bp-operated Greater Tortue Ahmeyim (GTA) LNG project started its journey in late January toward the project site off the coasts of Mauritania and Senegal. The FPSO set sail on Jan. 20 from Qidong, China. The vessel is a key part of the major integrated GTA development that also includes subsea development of gas fields and near-shore floating LNG (FLNG) facilities. 

Fig. 5. The FPSO Léopold Sédar Senghor is scheduled to be delivered by MODEC to operator Woodside Energy during first-half 2023 for eventual installation offshore Senegal and Mauritania. Image: Woodside Energy.

MIDDLE EAST

Saudi Arabia, the UAE and Oman are set to continue their growth in drilling and production, with special emphasis on developing gas discoveries for Saudi Arabia and the UAE. All three countries are also exploring energy transition and carbon capture with increasing interest. World Oil anticipates regional drilling to increase 16.8%. Regional oil production was up 10.8% during 2022 at 27.465 MMbpd. 

Saudi Arabia. Saudi Aramco continues to seek funding for its Jafurah gas project that will develop 200 Tcf of reserves. So far, $28 billion out of the $110 billion needed has been secured. Meanwhile, development of the Dorra offshore field by Saudi and Kuwait in the Neutral Zone is expected to cost $7 billion, according to an agreement signed last year by the two countries. The field holds reserves totaling 11 Tcf of gas and 300 MMbbl of oil. It potentially could produce 1.0 Bcfgd and 84,000 bcpd.  

Meanwhile, a rig manufacturing JV and two new fabrication yards have added to the Kingdom’s  jackup rigs that are expected to total as many as 92 by end-2023, Fig. 6. Overall, there is n, o indication that the Kingdom’s activity will slow, with production ambitions set for 12.3 MMbopd by 2025. The Kingdom is also keeping a non-oil energy future in mind; a carbon capture sequestration center with 9-Mt capacity was announced in November. We expect drilling to increase 35.1% this year. Saudi production averaged 10.475 MMbopd last year, up 13.6%. 

Fig. 6. Saudi Arabia has been adding to its available fleet of jackup rigs for work offshore the Kingdom. Image: Saudi Aramco.

UAE-Abu Dhabi. The UAE continues to pursue a balance between increased production and new energy investment. Abu Dhabi state firm ADNOC seeks to pursue gas self-sufficiency while also realizing ambitions of producing 5.0 MMbopd and 6.0 MMbopd by 2025 and 2030, respectively. In addition, three new discoveries last May added an estimated 650 MMbbl of oil to existing reserves.  

Accordingly, ADNOC has awarded a $1.53 billion contract to ADNOC Drilling to support the expansion of offshore operations and its goal of boosting crude oil productive capacity. The two-year contract covers the provision of 12 jackup rigs, two island rigs, and associated integrated drilling services. Not surprisingly, World Oil predicts drilling will increase 15.9% this year. Abu Dhabi’s oil production averaged 3.191 MMbpd last year. 

Back in October, ADNOC said that it set a world record for the longest oil and gas well drilled—a 50,000-ft well at its Upper Zakum concession. ADNOC said the well is about 800 ft longer than the previous world record set in 2017. ADNOC Drilling drilled the well from Umm Al Anbar, an artificial island. Extended-reach wells will tap into an undeveloped part of the Upper Zakum reservoir. They potentially could increase the field’s production capacity by 15,000 bopd, without the need to expand or build any new infrastructure. 

Iraq is the second-largest crude oil producer in OPEC after Saudi Arabia. It holds the world’s fifth-largest proved crude oil reserves, at 145 billion barrels, representing 17% of proved reserves in the Middle East and 8% of global reserves.1 Most of Iraq’s major known fields—all of which are located onshore—are producing or are in development.  

The country’s history of production hurdles continues into 2023, and there is a lack of new projects. Development of Gharraf and Nassiriya fields finally began last April with a 20-well drilling campaign. There were 92 wells drilled in that effort during 2022. Meanwhile there are plans for 83 more wells at Majnoon field by the end of 2023. If this trend continues, then government ambitions for 5.0 MMbpd to 5.5 MMbpd of oil production by 2028 might just be within reach. Drilling is set to increase 7.7% this year.  

Kuwait expects its oil revenue to be approximately $56 billion during 2023. The emirate is seeing its ambitious crude production expansion plans slow down just a bit, due to inflationary pressures for equipment and services, as well as a slowing of global demand growth.  

Back in 2018, state firm Kuwait Petroleum Company (KPC) debuted its plan to raise production capacity to 4.75 MMbopd by 2040, and it was considered to be very ambitious. Officials have since revised that target to 3.5 MMbopd by 2025 and 4.0 MMbopd by 2040, which still may be overambitious. The largest producing field and primary source of oil supply is Greater Burgan field. As the world's second-largest field, Greater Burgan is producing at 95% of its capacity. 

KPC is also continuing development at the Neutral Zone that the emirate shares with neighboring Saudi Arabia. So, in the short run, Kuwait continues a fairly robust development drilling program, in spite of it being scaled back partially. World Oil forecasts a 30.8% increase in Kuwaiti drilling. Oil production last year averaged 2.830 MMbpd, up 12.0%. 

Oman is keeping up its breakneck pace in planning future drilling and production during 2023. Drilling is expected to increase 8% this year, with new contracts signed during 2022 promising some 700+ new wells over the coming years in addition to existing plans. Meanwhile, production rose during 2022 to 1.064 MMbopd in December (up 9.6%), with plans to boost that number to 1.175 MMbopd during 2023. Overall, we predict that Oman’s drilling will rise 8.0%. 

Iran’s combined crude and condensate production is estimated to have risen 5.5% to 3.281 MMbpd during 2022. There are estimates that Iran's average daily exports of crude and condensate grew from about 670,000 bpd in 2021 to nearly 900,000 bpd last year, which would be a 35% gain.  

Iran expects to maintain production capacity at fields with high decline rates by working over existing wells and drilling additional new wells. Insufficient foreign investment during the past few years, due to U.S.-led sanctions, spurred Iran to award some oil development projects to local companies. However, these local firms have limited access to capital and technology needed to maintain production at mature fields. Iran’s development plans reportedly have only made limited progress over the past several years. 

Lebanon signed a maritime territory agreement with Israel in October 2022, ending a years-long deadlock for offshore exploration. However, licensing round deadlines moving from December 2022 to June 2023 suggests that 25.4 Tcf of estimated gas reserves hasn’t yet attracted many players. Still, assessments in the Qana offshore field will conclude in first-quarter 2023, with drilling to begin in the third quarter. Viable prospects, or a lack thereof, will be clear by the third quarter, but Lebanon’s future production will have to contend first with an uncertain economic and governmental climate. 

FAR EAST/SOUTH ASIA

China and India are looking to boost production to meet local demand, through increased development and nurturing an encouraging environment for outside investors. Meanwhile, a cluster of offshore discoveries during 2022 in both Malaysia and Indonesia promises a strong, potential development outlook for 2023. World Oil anticipates drilling to increase 8.2% across the region. Oil production across the area averaged 6.364 MMbpd, down less than 1% from the 2021 level.  

China, of course, is the dominant country, and it’s holding down the region’s rate of growth, canceling out some of the higher-percentage gains in other countries. We are getting indications that China is having supply chain issues in the field, coupled with problems in getting personnel to the field, due to complications from Covid lockdowns. This is why we don’t expect the country to have a higher rate of drilling increase than the 8% we are predicting, Fig. 7.   

Fig. 7. Chinese drilling is expected to be limited to 8.0% growth during 2023. Image: Sinopec.

By the same token, China is entering an era of increased deepwater activity, with production expected to increase in the coming years. Indeed, CNOOC Ltd. in December commenced production from the Enping 15-1/10-2/15-2/20-4 joint oilfields development project in the Eastern South China Sea. 

Meanwhile, onshore, a Sichuan basin discovery added an estimated 387.8 Bcm of gas reserves, and the already producing Fuman oil field has plans to nearly double production to 50 MMt of oil and gas by 2035. Last year, Chinese oil production averaged 4.101 MMbpd, up 2.7%. 

India is looking to boost production, given the country’s unusually high, 3% annual increase in oil usage. This has prompted plans to supply 25% of India’s annual oil demand with domestic supplies by 2030. State firm ONGC is set to increase oil and gas production to 25.69 MMt and 27.53 Bcmg, respectively, by 2025. 

Meanwhile, India hopes to encourage increased outside investment, with 26 new blocks and improved mobility in exclusive economic zones. World Oil anticipates drilling to increase 6.8% this year. Oil production across India was 611,800 bpd in 2022, down less than 1%. 

Malaysia recorded 16 discoveries in 2022 with just 53 wells drilled, and World Oil expects that activity to increase 45.3% in 2023. With all activity remaining offshore, the development of gas-heavy discoveries will take center stage. Investment house Kenanga Research sees a bright year ahead for state firm Petronas during 2023. “We are overall positive from our read-through of Petronas’ Activity Outlook for 2023-2025,” said Kenanga. “…the activity outlook for Petronas remains positive, in line with the continued recovery that we have seen throughout 2022,” added Kenanga.” Specifically, Petronas mentioned that this is positive for drilling rigs, well services activities and underwater services, due to repair and maintenance activities required to maintain the integrity of offshore facilities.” 

Indonesia has potential to increase its oil and gas production during 2023, despite falling short with efforts in 2022. Specifically, East Natuna, the Bawean Block and Hidayah field have the promise to add 222 Tcfg, 100 MMbbl and 88.55 MMbbl, respectively. World Oil anticipates a 6.2% increase in drilling this year. Indonesian oil output fell 7.1% last year, to 612,900 bpd. 

SOUTH PACIFIC

Industry focus in the South Pacific region continues to favor gas production, as both Australia and Papua New Guinea look to grow their share of the Asian LNG market in the wake of the war in Ukraine. World Oil anticipates an 11% increase in drilling for the region. South Pacific oil production was down 6.1% last year at 381,900 bpd. 

Australia continues to pursue LNG success. Yet, LNG exports are set to decline in 2023 for the first time in a decade, Fig. 8. This is due to a combination of declining gas production and an ongoing reallocation of natural gas supply to the domestic market, to meet strong demand. It’s not surprising then, that gas drilling will be up in both Queensland and South Australia this year. 

Fig. 8. Australia’s LNG exports may decline in 2023 for the first time in a decade, due to declining gas production and reallocation of gas supply to the domestic market, to meet strong demand. Image: Woodside Energy.

On the oil side of things, Santos Ltd. has delayed the final investment decision (FID) for the Dorado oil field development until at least later this year and perhaps into 2024. The project would be in the Bedout subbasin, offshore Western Australia, in license WA-64-L. The delay is due to the current inflationary cost environment and supply uncertainties. 

On the regulatory front, a gas price cap and a recent ruling on consulting indigenous landowners could suggest increased government intervention in the industry moving forward. Nevertheless, the Mangat Group has partnered with Liberty Petroleum Corporation on a large prospective area for exploration work in Western Australia. This exploration area exceeds 20 million acres, representing one of the largest permit areas on the continent of Australia. 

World Oil expects Australian drilling to increase 10.4% this year. The country’s oil production last year slipped 6.6%, to 314,400 bpd. 

Papua New Guinea. Following in Australia’s footsteps, Papua New Guinea is also looking to become a major LNG hub, with some predictions suggesting the economy could be LNG-fueled for the next 30 to 40 years. A new 5.3-Mtpa LNG project is anticipated to be sanctioned this year, adding to future LNG production. Meanwhile, government attention is set to focus on attracting greater exploration during 2023. Our forecast is for drilling to increase 50%, from two wells to three wells. Oil production declined 3.2% in 2022, to 36,200 bpd.