LONDON: 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 (£583.90 billion) 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.