Success in the exploration and production of oil and gas requires a company to overcome three interlocking sets of probabilities. The probability that a given geologic structure contains hydrocarbons; the probability that the hydrocarbons will be located and the probability that once located the hydrocarbons can be commercially developed. No one gains if hydrocarbons are found but not produced. And that can happen because of either logistics, economics and/or markets. The Tripura gas field, for instance, was discovered decades ago but it remains under the surface because of the absence of a proximate market. Today the probability of locating hydrocarbons and then producing them on a commercial basis is more challenging than perhaps ever before. Why?

First, it is because the private companies do not have access to ‘easy oil’. Most, if not all, such designated oil is under the control of state-owned companies who understandably are disinclined to share their resource with the private sector. In consequence, they are now the dominant players in the market. A ranking of top 20 petroleum companies in the world by size of hydrocarbon reserves would place Exxon-Mobil, Shell and BP in positions 18, 19 and 20 respectively. The top 17 positions would be occupied by the state owned companies like Aramco (Saudi), Gazprom (Russia), Petronas (Venezuela) and Sonatrach (Algeria). To sustain growth, therefore, the private companies have had to extend their exploration activity into geologically complex, environmentally harsh and logistically labyrinthine acreages like the Arctic and deep waters. They have certainly measured up to the task. But they have also had to accept the reduced probability of finding new discoveries and the consequential hike in the overall finding and development costs.

... contd.