Worldwide upstream oil and gas spending in 2012 will climb by 10% to reach $598 billion, according to a recent outlook by Barclays Capital.
Barclays surveyed 350 oil and gas companies worldwide for the report and found that although companies seem to be conservative in their price estimates, higher oil prices are driving the projected spending increase.
In aggregate, oil and gas companies are basing 2012 capital spending budgets on an average oil price of $87/bbl for West Texas Intermediate crude oil and $98/bbl for Brent crude. This compares with current WTI and Brent prices of $101/bbl and $110/bbl, respectively, indicating that oil and gas companies are likely taking a conservative view on oil prices given the uncertain economic environment, Barclays said.
"We believe the majority of companies have taken a conservative approach in setting their initial 2012 budgets, and current oil prices levels, if sustained, would suggest that there is considerable upside to our current forecasts as we move throughout the year. By region, exploration and production spending is expected to rise most meaningfully in Latin America, Africa, Europe, the Middle East, and Russia," the report said.
Recent exploration success in various regions of the world confirms that exploration is likely to be at the forefront of spending growth in 2012, Barclays said.
In North America, E&P expenditures are expected to increase by 8% from 2011 outlays. Elsewhere, spending is forecast to grow by 11% from this year.
Capital spending is forecast to climb by 21% in Latin America, driven by an increase by Petroleos Mexicanos, an aggressive capital program for Ecopetrol in Colombia, and Petroleo Brasileiro SA's continued deployment capital in support of its multiyear presalt development plan.
Spending in Africa also is projected to rise by 14%, as civil unrest and political disruptions in North Africa and other areas abate.
In Russia, OAO Lukoil is expected to be particularly aggressive over the next several years and the company recently announced plans to invest $48 billion through 2014 to increase production, including $14 billion to be spent in 2012, the report said.