The U.S., Russia and just about every other major oil-producing nation—except Saudi Arabia—are witnessing a drop in upstream investment, which is expected to decline more than $1 trillion through 2020 as commodity prices have crumbled in the last two years.

But the news, as revealed this week by energy research firm Wood Mackenzie, is not all doom and gloom.

Cost deflation has had a hand in driving down spend. Research by the firm showed that upstream costs in U.S. unconventional sector fell by 25% in 2015, and models show costs could fall by another 10% this year.

“For now, the select few projects that are progressed will do so because costs have been cut substantially to hit economic hurdle rates,” Malcolm Dickson, principal analyst at Wood Mackenzie, said in a news release. “But kick-starting the next investment cycle will require more cost deflation and project scope optimization along with confidence in higher prices and arguably fiscal incentives.”

As the worldwide abundance of oil and gas surpassed demand, companies—including those that have successfully used technology and improved techniques to efficiently get more hydrocarbons from the ground—have made less money due to oil prices being less than half of what they were two years ago. In turn, waning profits have forced many to cancel or delay projects in addition to seeking cost reductions and cutting staff positions.

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The firm said that deepwater fields have been hit the hardest, as spending on deepwater and ultra-deepwater projects has been cut by nearly 40% for 2016-2017.

“Our 2015-2020 forecast for capital investment has been reduced by 22% or US$740 billion since Q4 2014,” Dickson said. “In the nearer term the impact is even more severe: compared to pre-oil price fall expectations, capex will be down by around US$370 billion or 30% in 2016 and 2017.”

The struggle to breakeven could bring more cuts throughout the year as more projects move down on the to-do list, according to Wood Mackenzie.

The report showed that cuts in the U.S. Lower 48 are the deepest.

Here, Dickson said, forecast capital investment was cut in half in 2016-2017, falling by $125 billion.

“This is mainly down to a big drop-off in drilling, with the onshore rig count dropping by 53% from 2015 to 2016,” he said.

The latest Baker Hughes rig count showed the U.S. picked up six land rigs for the week ending June 10, compared to the previous week, bringing the rig count to 388. Although the gain was a change from weeks of declines, the number pales in comparison to numbers seen just a year earlier. Back then, the U.S. land rig count was 825.

Still, drillers have been capable of producing more due to drilling and other efficiencies gained.

Worldwide, rig counts are also down. According to Baker Hughes, there were 1,405 rigs running worldwide in May 2016. That’s down from 2,127 in May 2015.

In Russia, investment is on course to fall by 40% over the next two years, mostly due to the rouble depreciating against the dollar, Wood Mackenzie said. However, the firm pointed out that Russia is poised to keep drilling, having set a post-Soviet liquids production record of 10.9 million barrels per day in March.

Moreover, “there will be no drop in Saudi Arabian investment in 2016-2017,” Wood Mackenzie said. It is among the Middle Eastern countries, including Iran, working to either maintain or grow its market share.

Elsewhere, capex cuts are impacting both exploration and production.

Due to the oil price drop, the firm forecasts that 7 billion barrels of oil less will be produced between 2016 and 2020.

“Discretionary projects have been hardest hit with conventional pre-FID (final investment decision) greenfield investment alone down US$80 billion from 2016 to 2020,” Dickson said.

The firm also revised down its forecast for conventional exploration investment by $300 billion.

“Although exploration investment has more than halved since 2014, and the figure is expected to be around US$42 billion per annum for 2016 and the same in 2017, costs have not been cut as much and as quickly as we expected,” Andrew Latham, vice president of exploration research at Wood Mackenzie, said in the release. “Some deepwater exploration spend has been protected by long rig contracts, but as these unwind we expect sharper cuts than in non-deepwater.”

Velda Addison can be reached at vaddison@hartenergy.com.