BAKU, Azerbaijan, Aug.8. Fitch Solutions says global oil and gas capex is expected to post revised growth of 17.2 percent in 2022 to USD556bn over its previous forecast of 11.6 percent growth over 2021, Trend reports with reference to the company.
“Mid-year guidance from the vast majority of oil companies show a reluctance to break from the focused capital discipline narrative targeting only mild growth of the low single digits and efforts to improve efficiency. Intense focus on driving down costs has led to high profits at time of record energy prices but less capital is being allocated to expanding production setting the stage for continued tight supply in years ahead. This multi- year strategy to focus capital investment on high margin projects has helped oil and gas companies yield record levels of profits against the background of high oil and gas prices,” reads a report released by Fitch Solutions.
The company analysts note that for vertical integrated operations with a significant downstream arm, record refining margins and strong global demand for refined fuels further added to the record gains in profit for the first half of 2022.
“However, the strong profits have not translated to increased capital expenditure for the years ahead as is typical when high oil prices spur new investment into the sector although we expect global investment to reach pre-pandemic levels by 2023. 2022 year to date gains in oil prices of over 40 percent, to above USD100/bbl, have yet to see global investment in the sector rise above pre-pandemic levels and remain well below past highs. The boon in oil and gas prices has not seen a raft of new oil and gas investment. While we have seen a modest uptick and exploration and development activity, a wholesale boom in development projects has yet to materialize as companies focus on advancing projects that are below the USD60/bbl breakeven cost,” reads the report.
Fitch Solutions’ experts recall that in 2018, oil prices posted an annual average gain of 31 percent and capital expenditure grew by 14.2 percent.
“If our Brent price forecast holds and the 2022 annual average price is USD105/bbl and 48 percent growth, the muted capital expenditure growth of 17.2 percent will be well below the historic average for upticks in oil prices. Oil companies have clearly signaled that the oil price boom this time around is shaping up differently to those of past and disciplined spending will remain a key fixture corporate strategy for the industry,” said the company.
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