In the face of steady annual increases in demand for oil over the past decade, the West’s big oil companies largely have failed to improve the yearly exploration yield of new reserves to their portfolios, the study shows. Smaller discoveries and diminishing reserves per well are adding to pressure on oil companies in the West to gain access to large, unexploited oilfields in Russia and the Gulf states.

The Wood Mackenzie report, Global Oil and Gas Risks and Rewards, shows that typical annual returns from oil exploration — in the region of between three billion and five billion barrels — have not changed since the early 1990s. The only exception to the largely stagnant exploration trend was the discovery in 2000 of Kashagan, a ten billion barrel oilfield, in the Caspian Sea.

Graham Kellas, vice-president at Wood Mackenzie, reckons that the international oil companies were highly successful in finding oil during the past decade, but now are working in a diminishing field of opportunity. “The hunt for oil continues, but it is becoming increasingly difficult,’’ he said. “There are few areas of the world that are unexplored and that is why the larger companies are so keen to get access to areas that are off-limits.”

Shut out from the large known reserves of Saudi Arabia, Kuwait and Iraq, the West’s oil companies have had significant successes, such as in the deep water of the Gulf of Mexico, Angola and Nigeria. There have also been failures, such as Brazil and Azerbaijan.

Mr Kellas said: “Deep- water Brazil has been a big disappointment. No commercial discoveries have yet been made by international oil companies, despite having spent nearly $1.5 billion.” The collapse in the oil price in 1998 and the ensuing wave of company takeovers led to cutbacks in exploration spending that the oil companies have been slow to restore, fearing further oil gluts. Exploration drilling peaked in 1998 with a total of 725 wells drilled, but in 2003 the West’s oil industry completed just 554 wells.

The diminishing average size of new discoveries is another factor causing the oil companies to seek access to Russia’s known oilfields. “Most of the activity in the former Soviet Union is the development of discoveries made in the Soviet period,” Mr Kellas said.

PRICE PROBLEM

• Opec producers held out hope of further rises in production at today’s ministerial meeting to try to tame soaring crude prices, but they said that the oil cartel has little power to curb price rises, which were due to a lack of refinery capacity rather than crude supply. UK Brent crude closed up 57 cents at $53.24 a barrel.

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