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After two years of cutting expenses, oil companies are once again looking to expand their investments.
According to BMI Research, oil companies are expected to increase capital expenditures by 2.5 percent in the coming year, above this year, which would mark the first such yearly growth since 2014. The research firm also noted that growth should continue, reaching 14 percent by 2018. In 2014, capital expenditures were at $724 billion, but this new growth is not expected to reach that level. 2014 saw the largest oil crash in years, which prompted companies to cut back on many activities in exploration and drilling.
BMI indicated that independent producers across North America, Asia and Russia are planning to boost investments in 2017 that will be bigger than the cuts made by large companies such as Exxon and Total SA. Christopher Haines, the head BMI’s oil and gas research, said that North America will lead the way in boosting capital expenditures. He commented, “North America is where we’re really expecting things to turn around. We’ve seen a push to really reduce costs, reduce spending and take out any waste and inefficiency. These companies have gotten to the point where they’re all set up to react.”
By contrast, the International Energy Agency (IEA) is predicting that the cost-saving trend will continue in the coming year. Earlier in the month, the IEA stated that industry investments were poised to drop 24 percent to $450 billion on the year, outstripping a 17 percent decline that was predicted back in February.
The IEA also noted that in 2015, capital expenditures saw a drop of 25 percent, which helps account for a $300 billion drop in spending by oil companies during the two-year period. The IEA does not look for things to improve in 2017. In its report this month the agency stated, “There are no signs that companies plan to increase their upstream capital spending in 2017. Many operators have revised downwards their 2016 capital spending guidance throughout the year and, as of September 2016, they plan to maintain 2017 investment at 2016 levels or even reduce it further.”
Lincoln Brown for Oilprice.com
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Lincoln Brown is the former News and Program Director for KVEL radio in Vernal, Utah. He hosted “The Lincoln Brown Show” and was penned a…