* Exploration budget may fall below $40 bln, report says
* Number of exploration wells will however hold steady
* Returns to improve as cost decline
* GRAPHIC: oil and gas exploration spend tmsnrt.rs/2h7xIS3
By Ron Bousso
LONDON, Dec 9 Global spending on oil and gas
exploration in 2017 could fall below this year's $40 billion,
but lower costs mean profitability will increase, consultancy
Wood Mackenzie said in a report on Friday.
Faced with a 30-month-long oil price downturn, oil companies
including Exxon Mobil and Royal Dutch Shell
have slashed spending budgets in recent years, with exploration
bearing the brunt.
According to Wood Mackenzie, the share of exploration in
overall oil and gas production investment will dip to a new low
of 8 percent in 2017.
"Overall investment will at best match 2016 year's spend of
around $40 billion, and may yet fall further," said Andrew
Latham, vice president of exploration at Wood Mackenzie. That
compared with a 2014 peak of $95 billion.
Lower costs of drilling rigs, simpler wells designs and
cheaper seismic imaging mean well counts may nevertheless hold
up close to 2016 numbers while returns improve.
"After a decade in the doldrums, the majors' returns from
conventional exploration improved to nearly 10 percent in 2015.
The rest of the industry is heading in the same direction.
Fewer, better wells promise a brighter future for explorers,"
The rate of discoveries is not expected to fall next year
and to average around 25 million barrels of oil equivalent per
The world's top oil companies have struggled to replace
natural decline in production through exploration in recent
years and will have to rely more on acquiring fields and smaller
companies in the future, Latham said.
(Reporting by Ron Bousso; Editing by Ruth Pitchford)