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IHS Markit identifies 5 billion barrels of oil equivalent in short-cycle opportunities outside North America

New energy research from business information provider IHS Markit has identified more than five billion barrels of oil equivalent (BOE) in numerous smaller, previously bypassed, or underperforming reservoirs outside North America that offer oil and gas operators a shorter-cycle path to production than new, frontier projects in undeveloped areas.

The IHS Markit report, entitled: “Back to the Basins: International Shorter-Cycle Opportunities,” initially assessed five, short-cycle projects outside the US in mature, late-life basins in Mexico, Nigeria, Egypt, Brazil and the North Sea, and included both shallow water and mature, onshore areas that break even at per-barrel costs under US$40.

These five case studies represent just a fraction of the opportunity that we identified globally. Stagnant oil prices continue to limit large-scale investments in global exploration worldwide, including deepwater plays, and many onshore US projects are not yet cash-flow positive, so energy investors are demanding financial returns.

These investors want to see companies demonstrate greater capital discipline and growth while living within their cash flow. The focus has moved away from simply reserves capture, to production growth, and now to value maximization. In this environment, reduced tolerance for exploration risk persists.

—Kareemah Mohamed, associate director, Plays and Basins research at IHS Markit, and author of the analysis

Cognizant of this “new normal” E&P environment, Mohamed said she embarked on a study that assessed mature, producing basins with a goal of helping operators identify less capital-intensive, shorter cycle-time projects. Projects, Mohamed said, that would enable operators to reduce risk by leveraging both existing basin infrastructure and their unique capabilities in plays outside the US and Canada.

IHS Markit defines shorter-cycle projects as those that can generate first cash within one to two years of development, or, in the case of new entrants, projects that progress to final investment decision (FID) in less than three years. The typical deep-water project averages seven years to reach FID with exponentially more upfront investment.

The key screening criteria to identify these targets and minimize investment risk, Mohamed said, were shallow-water shelf areas and onshore mature fields—basins with a proven hydrocarbon system. In addition, these areas had to have existing production and infrastructure (wells [and associated production and well data], pipelines, platforms and gas plants) in place.


With these basins identified, the next step was to look at a combination of above ground and sub-surface risks to pinpoint avenues for new-basin entry. Mohamed identified such opportunities that could allow for incremental added production volumes, but also provide a source of free cash flow to the operator.

Due to the changing investor sentiment toward value maximization and a reduced tolerance for risk, as well as the nature of these shorter-cycle projects in mature basins, it was essential to advance the research approach from one of a project-by-project basis to a whole-basin strategy.

We’ve observed that the best results occur when operators target basins with materiality and two or more working petroleum systems, stacked reservoirs, existing infrastructure, service-sector capacity and technical knowledge.

—Jerry Kepes, executive director for Plays and Basins research at IHS Markit

Mindful of these market dynamics, Kepes said he and his IHS Markit researchers see this shift to whole-basin strategies as being critical to operators achieving competitive performance, representing a fundamental shift in the approach to analysis and company strategies going forward.

Whole-basin strategies can include ‘field growth’ where the focus is on targeting new barrels in old fields, but can also include upfront, new ventures work that targets shorter-cycle barrels in under-explored areas in existing commercial basins,Some of those mature basins present fresh opportunities for operators because an E&P opening makes new acreage available.

—Jerry Kepes

Mohamed’s research included case studies on Oman and the Egyptian offshore Western Desert, but she also identified basins that were previously off-limits due to political instability, or those previously overlooked because of single operator (typically state-owned) access, stringent regulatory terms, or bureaucratic barriers, but now offer more favorable terms and are open to foreign investment. Additional examples of shorter-cycle development opportunities now available include basins in Mexico.

Eni’s new entry into Mexico’s mature, shallow-water Sureste Basin is one example. The Area 1 discovery (1.4 billion BOE) was made in an underexplored area of the Sureste Basin, with first oil targeted for 2019, just two years after discovery. Through leveraging existing basin infrastructure, the project’s expected break-even cost should be below U.S. $40 per barrel, according to IHS Markit.

This new-ventures screening alternative provides targets that offer operators a lower-cost path to free cash-flow in a shorter period, but also the potential for repeatable investment opportunities over time. In the current economic environment, this makes the short-cycle opportunities very intriguing to operators, so we are currently expanding the initial research to include more basins.

—Kareemah Mohamed



After 100 years of producing oil they are now scraping the bottom of the barrel, so to speak.

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