If we can’t find it, we can’t extract it!

We read an couple of  interesting articles today which gives rising concern to the spiralling cost of all natural resources exploration.  Over the last few weeks several projects have been halted as companies have run short of funding to complete their exploration programs.   Even the biggest players of the market have seen their profits impacted in the rising cost and it’s clear some projects once thought feasible are for now off the table.

In respect to Mining Justin Niessner published an article called  in the MiningNewsPremium.net online magazine.  It stated that Official data produced by the Australian Bureau of Statistics has revealed an 8.3% drop in Australian exploration spending over the March quarter to $A487.7 million, with Western Australia leading the investment retreat.  it also showed  in Western Australia exploration spending as falling 14.9%, or $44.8 million, over the period.

MINOLTA DIGITAL CAMERA

In seasonally adjusted terms, the national trend indicated a 9.2% fall in expenditure to $480.2 million over the quarter, compared to a peak of about $1 billion in the March 2012 quarter.

and in respect the oil and gas industry, Sylvia Pfeifer wrote an article recently of the Financial Times titled “Exploration: Rising cost of complex projects hits majors” in which several big player like Chevron, Royal Dutch Shell and ExxonMobil all clearly feeling the pain.  However it’s not stopping the small explorations companies from trying their luck.  We are keeping a close eye on several companies like Orogen Gold  over the next few months to see it’s decisions to explore a greenfield asset rather than develop infrastructure in a brown field asset turns positive of becomes another victim of escalating exploration cost.

Oil and gas drilling 3

Clearly commodity prices have a lot to do with deciding what is feasible and what is not.  Untimely what is not feasible today, will be tomorrow as we remain a consumptive society with limited resources.  “If we can’t find it, we can’t extract it!”  However why the sudden rising costs?  Are we now starting to pay for acceptable inefficiencies?