New figures published by the International Energy Agency (IEA) show that global oil discoveries dropped to a record low of only 2.4 billion barrels in 2016, while sanctioned projects fell to their lowest levels in over 70 years.

The trend in low oil projects has been attributed mainly to oil companies which have been cutting their spending on oil discoveries and projects. These two trend could continue this year as well, the report warned.

The report stated that oil discoveries have fallen to 2.4 billion barrels last year, compared to an average of 9 billion barrels annually over the past 15 years.

At the same time, conventional resources sanctioned for development last year also fell to 4.7 billion barrels, which was 30% lower than previous year. Final investment decisions have also dropped to the lowest level since the 1940s, the report noted.

The slowdown in the activities of oil sector is claimed to be the result of reduced investment spending driven by low oil prices. It also adds concern to global energy security.

Falling investments in oil sector also contrasts with the resilience of the US shale industry. In the US, there has been a rebound which increased investments sharply and the output increased and production costs also reduced by 50% since 2014. This growth has been a fundamental factor in balancing low activity in the oil industry.

Conventional oil production of 69 mb/d represents by far the largest share of global oil output of 85 mb/d. In addition, 6.5 mb/d come from liquids production from the US shale plays, and the rest is made up of other natural gas liquids and unconventional oil sources such as oil sands and heavy oil.

On the other hand, global demand for oil is expected to grow by 1.2 million barrels per day a year in the next five years and the IEA has warned against extended period of lower oil investment could lead to tightened supplies.

Spending on exploration is also expected to fall in 2017, third year in a row to less than half of 2014 levels.

Offshore oil, which comprises of a third of crude oil production and it plays an important role in future global supplies, has been hit hard because of industry’s slowdown.

Last year only 13% of conventional resources sanctioned were offshore. In comparison, between 2000 and 2015, more than 40% of resources sanctioned were offshore.

The offshore sector, which accounts for almost a third of crude oil production and is a crucial component of future global supplies, has been particularly hard hit by the industry’s slowdown. In 2016, only 13% of all conventional resources sanctioned were offshore, compared with more than 40% on average between 2000 and 2015.

IEA executive director Fatih Birol said: “Every new piece of evidence points to a two-speed oil market, with new activity at a historic low on the conventional side contrasted by remarkable growth in US shale production.

“The key question for the future of the oil market is for how long can a surge in US shale supplies make up for the slow pace of growth elsewhere in the oil sector.”

Image: Offshore discoveries and new starts have been particularly hard hit by the industry’s slowdown. Photo: Courtesy of GettyImages.