Baku, Azerbaijan, Oct.2
By Leman Zeynalova – Trend:
Capital expenditure across the 109 largest oil and gas companies globally will increase by 4.3 percent year-on-year (y-o-y) in 2018, said a report released by BMI Research (a unit of Fitch Group).
Despite limited forecast oil price growth in 2018, more projects are becoming viable at lower prices as cost structures fall, said the report obtained by Trend.
“Prolonged spending curtailments will drive a growing supply deficit from 2019.
Across our basket of 109 of the world's largest oil and gas companies, we estimate global capital expenditure (capex) on oil and gas operations will increase 4.3 percent y-o-y in 2018 to $471.9 billion,” the analysts believe.
This is 0.1 percentage points higher than the company’s prior estimate of 4.2 percent growth.
“Our latest research also shows that full year 2017 capex will come in approximately $12 billion below initial expectations at $452.3 billion, growing 4.5 percent as opposed to a previously expected 5.1 percent,” said the company.
BMI Research analysts state that there has been a marginal pullback in oil and gas spending compared to spending plans launched at the end of 2016 plans across majors, North American independents , Latin American national oil companies and Russian firms.
The reasons behind each differ, though the overarching factor influencing spending has been the lower than expected oil price over 2017, according to the report.
The reaction to the OPEC/non-OPEC deal in November 2016 drove Brent prices to the $55-57 per barrel range in January with expectations that this would be a floor over much of the year. However, with year-to-date prices averaging $52.5 per barrel, many companies have readjusted oil and gas spending plans to cope with lower than expected upstream revenues.
“In our view, spending caution will continue to prevail among publically traded oil and gas companies to prove shareholder value in an environment that demands cost efficiency over volume growth. Breakeven costs of $40 per barrel or below and long-term fixed price gas contracts are being targeted. We anticipate a further four to six projects will achieve FID before the end of 2017,” said the report.
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