In Barclay’s midyear global spending survey of more than 200 companies, global upstream spending for 2018 is on pace to rise 8%, essentially in line with its December spending report.
“Compare to the last two cycles, the recovery in global spending has been remarkably restrained, but may be poised to accelerate in 2019 based on encouraging signs in the Middle East and certain offshore markets,” Barclays said.
Collectively, North American budgets revised higher to a 15% increase in 2018, up from 9% in April (OGJ Online, Apr. 11, 2018) following meaningful capital spending increases from Occidental Petroleum Corp., Apache Corp., Pioneer Natural Resources Inc., and several others. Many cited a higher oil price environment, increased drilling and completion efficiencies, and higher steel costs due to tariffs.
According to the survey, the increases in US onshore budgets are mainly from three categories: Permian-based E&Ps, Other-liquids basin E&Ps, and Gassy E&Ps.
International upstream budgets were revised slightly higher to 5% from 4% in the previous survey.
National oil companies are the primary driver of international markets, accounting for 63% of total international spending, and plan to increase spending by 9% this year, offsetting modest international declines by the European international oil companies (0%) and US IOCs (-6%).
By region, Asia and Australia (+15%) are driving regional growth in 2018. Following a 13% growth last year, the region is expected to continue its double-digit growth this year, driven mostly by CNOOC (+64%) and Sinopec (+58%) offset by lower growth from PetroChina (+5%) and others.
Middle East spending is expected to remain virtually flat in 2018. Latin America (+3%) spending is expected to increase modestly in 2018. The continuous decline of PDVSA (-17%) will likely be offset by increases in Pemex (+9%) and flat spend from Petrobras (-1%).
Offshore spending, representing around 20% of global upstream spending, will continue to decline by a further 11% this year after an estimated 19% decline in 2017, according to Barclays.
“Offshore took longer time to decline following the downturn given the longer 3-5 year offshore development cycle and multiyear contracts on offshore rigs, but will also take longer to recover as well, with exact timing of an offshore recovery still uncertain. But higher expectations for meaningful offshore FIDs in 2019 may lead to increased activity in 2020,” Barclays said.
