Oil Investors Embark on Voyage of Discovery

Barely a week goes by without a major oil discovery being announced. Recent hot spots include the Gulf of Mexico, Brazil and West Africa. But beware jumping to conclusions about how much this changes the dynamics of energy supply, for oil bears or peak-oil pundits.

The discoveries show energy companies are no slouches in finding new resources with the right backdrop. This month alone, companies including BP, Petroleo Brasileiro and Eni have found nearly 10 billion barrels of oil equivalent of potential reserves. A consortium led by Anadarko Petroleum discovered what could be a major new field off the coast of Sierra Leone this week.

Unfortunately, political barriers are harder to drill through, particularly in countries with state-owned industry. Mexico’s industry, in the hands of monopoly Petroleos Mexicanos, remains oddly in decline.

Indeed, impressive as the application of new technologies is, consultancy Wood Mackenzie said the latest discoveries are in line with the underlying exploration trend of the past decade. Given the recent multiyear rally in oil prices, it is surprising oil output from nations not in the Organization of Petroleum Exporting Countries hasn’t increased.

WSJ