Thursday 26 January 2012, Amsterdam
The report contains a detailed analysis of the current and future capital expenditure of the various types of oil and gas companies – national oil companies, integrated and independent oil and gas companies. It also provides a detailed analysis and information on the capital expenditure across the entire oil and gas value chain globally. Detailed information on oil and gas capital expenditure across various regions – North America, South and Central America, Europe, the Middle East and Africa is also provided. The report also covers the planned oil and gas projects in upstream, refining, pipeline, liquefied natural gas (LNG) and petrochemicals.
Global Oil and Gas Industry Capital Expenditure Will Increase by 13% in 2012
Global oil and gas capital expenditure (capex) registered a sharp increase in 2011, with an increase of 14% on the oil and gas capex recorded in 2010. The trend of increasing capex by global oil and gas companies is expected to continue throughout 2012, as a further capex growth of 13% is anticipated in 2012. Such an increase in global oil and gas capex will primarily be driven by high, sustained crude oil prices.
As the availability of crude oil and natural gas from onshore fields declines, more complex and expensive technology will be required to produce oil and gas from deep and ultra-deep offshore areas, and unconventional sources such as oil and gas shales, oil sands and coal bed methane. It is estimated that in 2012, the global oil and gas industry will register a total capex of $1,026 billion.
Figure: Oil and Gas Capital Expenditure, Global ($bn), 2008- 2012
Sustained, High Global Crude Oil Prices Encouraging Increased Investments in Oil and Gas
Crude oil prices have been sustained at a range above $90 per barrel for the past year, due to increasing global crude oil demand coupled with supply-constraints. According to the IMF, crude oil prices will remain high in 2012 due to supply disruptions in the global oil markets, increasing demand in emerging economies and production constraints in a number of oil-exporting economies. The IMF expects the global oil price to average at $110 per barrel in 2012.
In 2011, global crude oil demand witnessed an increase along with supply disruptions due to crisis situations in several Middle East countries such as Libya, Egypt, Bahrain, and Tunisia. The resulting imbalance in the supply-demand situation led to an increase in global crude oil prices. The situation improved marginally subsequent to the disasters in Japan, which affected the operations of many of the country’s refineries and led to their closure for maintenance. As oil supply from countries such as Libya are yet to resume to pre-crisis levels, the supply-demand imbalance is yet to ease in the global market.
Natural gas prices witnessed a steep decline in 2011 amidst rising unconventional gas production in the US which led to decline in
gas imports by the US. The surplus gas available in the market led to decline in spot prices of natural gas. The gas prices steadied, to some extent, subsequent to the tsunami in Japan as gas demand in Japan increased. This trend is expected to spread throughout the rest of the world, as countries abandon or suspend nuclear power development activity in favor of gas fired power generation.
In view of the sustained high prices of oil and expected increase in gas prices, E&P companies are increasing expenditure in upstream activities for both conventional and unconventional oil and gas.
Global Oil and Gas Capex Will Increase, Driven by Investment from National Oil Companies and Integrated Oil Companies
Most oil and gas companies across the globe are undertaking the construction and development of capital intensive, upstream, midstream and downstream projects. National oil companies (NOCs) and integrated oil companies will register the highest expenditure, accounting for 84.6% of global oil and gas capex in 2012.
In terms of capex growth in 2012 over the last year, capex from independent oil and gas companies will increase from $131 billion in 2011 to $158 billion in 2012, representing a 20.6% growth. Capex from NOCs will increase from $448 billion in 2011 to $513 billion, up by 14.5%. Integrated oil companies will increase capex from $329 billion in 2011 to $355 billion in 2012, representing a 7.9% growth.
Increase in global oil and gas capex can be attributed to the positive demand outlook, which is encouraging the majority of oil and gas companies to increase capital expenditure in 2012.
Petrobras Plans a Capital Expenditure of $224.7 billion during 2011 - 2015
Petrobras plans to invest $119.2 billion, which is 53% of the company’s total capex, for the period 2011 - 2015, in exploration and production (E&P). About $39 billion, of the total E&P capex, will be allocated for exploration and development of pre-salt discoveries and is expected to produce 390,000bpd of crude oil by 2015. During 2011-2015, Petrobras plans to prioritize its domestic production and achieve the target output of 3,907,000 barrels of oil equivalent per day (boe/d) by 2014, of which 3,603,000boe/d will be produced in Brazil
New Oil and Gas Discoveries Boosting Oil and Gas Company Investment
The discovery of new oil and gas resources globally has encouraged many E&P companies to increase investments in those regions. In 2011, 227 oil and gas discoveries were announced worldwide. In 2012, many companies are expected to continue to increase capital expenditure budgets to utilize more upstream activities. E&P companies have started to increase investments in geologically challenging areas encouraged by high crude oil prices.
The number of M&A deals has been on a declining trend as most of the companies are concentrating on investments in the E&P sector. However, the value of the M&A and asset transaction deals has increased from $448.6 billion in 2010 to about $559.3 billion in 2011.
