Spending levels for 2010 will be more than US $380 billion, which is $19 billion more than last year. According to the latest research report from Wood Mackenzie, “On The Rebound – Global Upstream Spending Returns to Growth,” the surge in spending is one of several indicators that confidence has returned to the oil and gas industry, especially in the US.
While spending has not quite returned to the peak levels seen in 2008, Wood Mackenzie says the spending level shows confidence has returned in the oil and gas industry.
The US has experienced the most rapid rate of recovery, with total spending expected to return to close to peak levels by 2011. The report attributes most of this growth to unconventional resources.
Iain Brown, Wood Mackenzie regional upstream research manager, said spending in the US is expected to climb from a low point of $63 billion in 2009 to around $95 billion in 2013. “This is primarily due to restored confidence and an impressive renewal of activity in unconventional resources, particularly shale gas,” he said. “Leading growth areas include the northeastern US - where spending could exceed $11 billion in 2013, from around $3 billion in 2009 - and in the US Gulf Coast, as operators aggressively develop the Haynesville and Eagle Ford shales using horizontal drilling.”
Brown added that spectacular growth is planned in Australia and Iraq. According to the report, record growth in capital spending is already under way in Australia, with capital expenditure growth expected to triple by 2013 because of new project approvals and major gas developments. In Iraq, upstream investment is likely to climb rapidly to $10 billion by 2013.
“The economic crisis of late 2008 shook the foundations of the global upstream business,” Brown said.” Many higher cost capital projects were delayed, shelved, or abandoned, and annual spend dropped by [more than] $55 billion. Now, just one year on, the industry has proven remarkably resilient. Many plans have been restored or expanded in the expectation that demand and commodity prices will remain relatively robust over the longer term.”
Brown warned, however, that investment levels will take much longer to recover in some other countries like Canada and Russia because they were the most deeply affected by the global crisis. “Both countries have experienced a modest recovery, but current plans suggest that spending will not return to 2008 levels until towards the end of the decade,” he said.
The report also states that more than half of future upstream investment will come from the multinational majors and a range of prominent national oil companies (NOCs). Brown said, “PetroChina has by far the largest upstream commitment amongst the NOCs, and its spending plans rank with the largest of the international majors.”