Two years ago Total's chief Christophe de Margerie launched a "high risk, high reward" oil exploration strategy, betting he could hit a bonanza, even though his rivals had failed to make big discoveries.
But Total risks joining the industry trend of making only smaller and fewer finds, despite global investments in oil exploration heading to a record $1 trillion by 2017.
This week, Margerie told Reuters he gives himself until the year-end to find a major deposit or cut the exploration budget next year following several disappointing drilling campaigns.
Top players are struggling to find enough conventional oil. Majors are caught between growing pressure from investors to cut spending and boost profits and the increasingly costly need to replace declining onshore and offshore reserves.
"Over the last 10 years the rate of return from exploration has diminished with time," said Andrew Lodge, exploration director at London-listed explorer Premier Oil.
"In the heyday of 2001-2002 the average rate of return for the industry was 20 percent ... that dropped last year to around 10 percent," he said.
Disappointing exploration campaigns no longer make such big headlines as they were 10 years ago amid the "peak oil" debate.
In a measure of the success of drilling project, the number of new oilfield developments is set to drop below 50 per year in 2014 and 2015, compared with an average of 75 per year over the past decade, according to Nicholas Green, analyst at London-based Bernstein Research.
"This represents the lowest level of activity since 1999, lower even than the oil price crash of 2008-09," he said.
The declining rate of finds is now discouraging investment in certain areas, with drilling in the North Sea set to decline the most over the next two years. Southeast Asia is likely to be the only region to see increased activity, according to Green.
The complexity of "frontier exploration" such as the Arctic and the pre-salt deep waters of Brazil and West Africa has cut returns on investments.
reuters
