BAKU, Azerbaijan, Aug.8. Overall, the oil supermajors will raise annual capital expenditure by 19 percent in 2022 versus earlier guidance growth of 17 percent, Trend reports with reference to Fitch Solutions.
The latest report from Fitch Solutions reveals that mild rise in investment is coming from Shell, the sole exception in the group, who have boosted 2022 capital expenditure guidance by 17 percent since the company’s previous report. “Brent crude prices have averaged USD105/bbl for the first half of 2022, a gain of 48 percent over 2021’s annual average price. However, the sharp gains in Brent have failed to spur similar increased investment across the supermajors peer group. On the downstream side record refining margins have helped boost the profits significantly as the global contraction in refining capacity during pandemic supercharged fuel prices as post lockdown economies boomed. The record earnings should be the catalyst for increased long-term investment however the current guidance from the supermajors leaves little hint of capital expenditure excess,” says the report.
The company analysts point out that the difficulty in making multi-billion dollar investments over the long-term term continues to be dogged by uncertainty raised by the energy transition and most majors have chosen to exercise caution and remain balanced in guidance for capital expenditure in 2022.
“The lack of increased investment is another strong indicator for tight supply in the coming years. After years of low investment and threats to Russia’s access to global trade, markets remain on edge in fear of supply shortages helping to
keep the price outlook elevated. Although, higher interest rates from hawkish central banks have raised near-term concerns for oil demand the outlook for supply remains muted supporting the case for high oil prices. At the current price levels, above USD100/bbl, increased capital expenditure would be in order and higher risks projects undertaken given the elevated revenues being generated however, fears for long-term demand continue to mute long-term investment in the sector. As climate change impact spurs more efforts to decarbonize across all sectors, the high uncertainty for the financial performance of many of the oil and gas sectors long-lived projects will see production fall further from the majors in the coming years.”
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