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Does changing oil prices affect exploration work? Study answers

The Covid-19 pandemic caused a significant decline in oil prices in 2020, and it is undeniable that the change in oil prices has an impact on exploration work, whether that effect is direct or indirect, but the assumption of a direct and immediate relationship between oil prices and the number or size of discoveries remains an issue. Unclear.


A study by the Organization of Arab Petroleum Exporting Countries revealed that the decline in prices means a higher risk factor in exploration operations, since the expected return from discovering what will be less, and this may make companies reduce their budget for exploration operations, or direct those operations to areas with less risk and less cost, and thus The decline in prices often takes a period of time to show its reflection on the activities of the exploration operations.


The study of the impact of the decline in oil prices due to the Covid-19 pandemic on the field of exploration and production in the petroleum industry indicated that the decline in prices in the beginning of 2020, for example, did not mean that work would stop immediately, as there are work plans and budgeted budgets that were approved before starting work, and the lower prices do not mean Stop these plans immediately, as the plans take into account what several scenarios of oil prices take, which gives them the flexibility to adapt to these changes unless these changes reach limits that exceed the companies' ability to deal with the potential for loss, however, the change in the number of discoveries in the world can be observed. With the change in oil prices in recent years, as it seems that the decline in oil prices has led to a decline in the number of discoveries, while the increase in prices contributed to limiting the decline in the number of discoveries and also the existence of a time lag between the change in prices and the change in the number of discoveries as it is and became clear in the year 2020, which is a matter. It can be attributed to companies changing their spending plans and their subsequent impact on their business results. However, it is important to emphasize that raising the exploration budget does not necessarily mean obtaining new discoveries, but rather means that there are more opportunities to find these discoveries, as higher budgets can include three-dimensional seismic surveys instead of two-dimensional, reinterpret previous surveys, or increase The number of exploration wells, and other activities that fall under the umbrella of exploration operations.