Exploration flat: majors need prospect of big discoveries: a good argument can be made that the industry worldwide isn't working as hard as it could to find new oil.

• Author: Bradner, Mike

Where are all the drill rigs? Still stacked, that's where.

Despite the spike in oil prices, the rigs are mostly still in their storage yards.

Given all the cash rolling into the industry from high prices-and the current extreme tightness of worldwide oil supply-you'd think the explorers would be busy.

Alaska, however, will see only a modest amount of oil and gas exploration this winter, about the same as in previous years.

It's frustrating for Alaskans because they see the big North Slope oil fields declining in production, no significant wildcatting to find new fields, and the Slope oil producers, like producers elsewhere, raking in record amounts of cash.

The picture isn't that simple, of course. The reluctance of major oil and gas companies to spend money for exploration is a worldwide phenomenon. What are the companies doing with their cash? They appear to be spending the money to buy back debt, pump up dividends to make their stock attractive, almost anything, it seems, except finding new oil.

That may be a bit of an unfair criticism, given the initiatives in Russia, offshore West Africa, the Barents Sea and the deepwater Gulf of Mexico. But a good argument can be made that the industry worldwide isn't working as hard as it could to find new oil.

The sobering truth might be, however, that the major companies aren't spending because there aren't a lot of prospects, at least for truly big discoveries.

ON THE DECLINE

The oil "peak" theory--the notion that most of the world's producing areas have peaked, are past their prime and are declining--is attracting more attention among geologists. Economists still debate the idea, arguing that technology will solve the problem. But the fact remains that most of the world's major oil producing regions, including Alaska, are declining.

Then there is structural change in the industry. Super-majors like ExxonMobil and BP, citing two companies who are Alaska producers, need very large discoveries to replace the oil they produce every year. These kinds of prospects are getting fewer and fewer worldwide.

Large prospects are mostly absent from Alaska, too, outside of the Arctic National Wildlife Refuge, but getting Congress to approve exploration in ANWR seems a distant hope. The reality appears to be that Alaska no longer has the kinds of prospects that attract the super-majors' wildcat exploration dollars.

However, the big companies are, in fact, developing new oil in Alaska. They're exploring in a different way, by tapping undeveloped oil resources in and around the producing fields. In recent years, satellite oil pools...