Wood Mackenzie released a new report that revealed that global upstream capital spending in 2010 will return to higher growth and is set to exceed US$380 billion.
Wood Mackenzie’s latest research report ‘On the rebound – global upstream spending returns to growth’ shows that confidence in the upstream market has returned to many regions around the world but it is not consistent in all areas. Iain Brown, Wood Mackenzie’s Regional Upstream Research Manager explained: “It is clear from our understanding of operators’ plans in the autumn of 2010, that confidence has returned to many regions and sectors of the industry, although this effect is far from consistent across the world.”
The report estimates that total upstream spending will recover to around US$380 billion in 2010, which is US$19 billion higher than in 2009 but is still 10 per cent lower than the historical high of 2008. This revival is set to continue over the next three years and global spending could recover to 2008 levels by 2012 or 2013. The report says that more than half of future upstream investment will come from the multi-national majors and a range of prominent national oil companies (NOCs).
Brown noted: “PetroChina has by far the largest upstream commitment amongst the NOCs, and its spending plans rank with the largest of the international majors. It has pursued an international expansion strategy in the past ten years, but still spends only 5 per cent of its upstream budget on overseas projects.” The most impressive recovery has been in the US, where total spend should return close to peak levels by 2011.
The reason given for the bounce in the US market is put down to the increased activity in unconventional resources, particularly shale gas. Leading growth areas include the northeastern US, where spending could exceed US$11 billion in 2013, up from around US$3 billion in 2009. Other regions are also experiencing record growth in capital spending. Australia will see capital expenditure grow three-fold by 2013 as a result of new project approvals and major gas developments. While, Iraq will see upstream investment climb rapidly to US$10 billion in the next three years.
But the report also highlighted regions where investment levels will take much longer to recover. Canada and Russia, two of the world’s largest producers were deeply affected by the global crisis, and upstream spending was reduced by around one-third through 2009. Brown stated that: “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.”
