South America's Equatorial Margin: A new exploration phase

With acquisitions and farm-ins continuing at an unparalleled rate, we analyse what lies ahead for the South America's hottest oil and gas frontier exploration play over the next five years.

Since hitting the headlines following the Zaedyus discovery in French Guiana in 2011, licensing awards and farm-ins across South America's Equatorial Margin have continued at a pace unmatched elsewhere on the continent.

Even taking account of recent disappointing appraisal wells at Zaedyus and a series of unimpressive exploration drilling results, enthusiasm for the play and the promise it holds for material discoveries has not been dampened.

Activity timeline post-Zaedyus discovery

*Larger image available in the downloads panel

Our analysis shows that between now and 2020, companies will drill more than three times as many exploration wells than in the past five years, with the next phase of exploratory drilling set to begin in 2015.

Interest has come from a variety of players, including small independents, large independents, foreign NOCs and even majors.

Regional geology is the main driver. The Guyana and Foz do Amazonas basins are estimated to hold mean undiscovered resources of around 15 billion barrels of oil and 30 tcf of gas and the significant number of farm outs demonstrates companies desire to mitigate risk.

Meanwhile, it is hoped that rig sharing and the implementation of multi-client seismic programmes will alleviate high expenditure driven by the play's distance from ports, lack of infrastructure, strong currents in certain parts of the coastline and stringent permitting processes.

This next phase of exploration activity will determine the commercial viability of the area and least two exploration wells will be drilled next year in Suriname and Guyana.

These wells could have a significant impact on future exploration activity as several consortiums in each of those countries will next year decide whether to move to the next exploration phase which will include well commitments.

Across the entire play, we assume that around five exploration wells will be drilled in 2015 and the same number again during 2016. We expect this number to increase in 2017/18 as companies in Brazil's Round 11 committed to drill some 30 wells in the Equatorial Margin.

In addition, the notable number of blocks with seismic commitments over the next three years means that several more wells could be drilled before the end of the decade.

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Exploring South America's Equatorial Margin – the next phase is set to begin [Subscription required]

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