The turn is already underway. After years reducing its investment in exploration, The big oil companies have once again looked towards Africa and South America in search of new deposits. The trigger is clear: the price of oil driven by global supply uncertainty.
According to data from Rystad EnergyNorth Sea Brent crude has gone from around $60 at the beginning of the year to over $100 in a few months. This jump has completely changed the accounts of the sector. “Invest in the organic replenishment of reserves is becoming an attractive option in terms of profitability,” explains Schreiner Parker, head of emerging markets analysis at the consulting firm.
A pattern that repeats itself after every energy crisis
It’s not the first time it happens. The great oil crises —from the 70s to 2008—have followed a similar pattern:
- Abrupt price rise.
- Record profits for the oil companies.
- Increased exploration in new regions.
Now, with the conflict in the Middle East affecting one of the main producing areas in the world, the cycle is activated again.
The region concentrates a key part of global supplyand any interruption generates immediate tensions in the markets. This has led companies to look for alternatives outside traditional areas.
Africa and South America: the new frontiers of oil
The problem is that the most accessible deposits are already exploited. For this reason, companies are looking towards less developed areas, but with potential: West Africa (Nigeria, Angola, Namibia) and South America (Brazil, Guyana, Suriname).
These regions offer large unexploited reserves, but they also imply greater risks: high costs, political instability or lack of infrastructure. Still, with high prices, the balance shifts. What was not profitable before is now profitable.
Years of cuts and energy transition
The current turn contrasts with the strategy of the last decade. After the drop in the price of oil in 2014 and the pressure for the energy transition, many companies chose to reduce exploration expenses, bet on renewable energy and prioritize short-term profitability.
This caused a side effect: oil reserves of large companies fell to historic lows.
According to the International Energy Agency, investment in exploration and production fell significantly between 2015 and 2020, which today limits the ability to respond to .
More benefits, more investment
With oil above $100, the equation changes. Oil companies are once again generating great profits and that translates into more investment.
The objective is to replenish reserves and ensure future production. Without new discoveries, the ability to extract oil falls over time. And that’s where exploration comes in. Although it is an expensive and high-risk activity, it becomes profitable when crude oil prices rise.
The geopolitical factor: global uncertainty
The current context is not only economic. It is also geopolitical. The conflict in the Middle East, tensions on key routes such as the Strait of Hormuz —through which about 20% of the world’s oil passesaccording to the US Energy Information Administration—and the growing fragmentation of global trade are reconfiguring the energy market.
Added to this is the rise of protectionism and industrial policies, which are changing the rules of international trade.
What about the energy transition?
The return to exploration poses an obvious contradiction. While governments and international organizations insist on reduce the use of fossil fuelscompanies are investing in oil again.
The International Energy Agency itself has warned that, to meet climate goals, new large-scale oil and gas projects should not be developed. However, the reality of the market is different: demand remains high and energy crises reinforce the need for supply.
What has happened in recent months confirms an idea that has been repeated for decades: oil continues to be a central axis of the global economy.
When prices rise, priorities change. The energy transition does not disappear, but it slows down. And large companies are once again doing what they have always done in these scenarios: looking for new deposits.
