Energy majors to spend more next year

The oil industry may be ready to open its wallet after two years of slashing investments.

Companies will spend 2.5 per cent more on capital expenditure next year than they did this year, the first yearly growth in such spending since 2014, BMI Research said in a report on Thursday. Spending will increase by another 7 per cent to 14 per cent in 2018. It will remain well below spending in 2014, before the worst oil crash in a generation caused firms to cut back on drilling and exploration to conserve cash, the researcher said.

North American independent producers, Asian state-run oil companies and Russian firms are prepared to boost investments next year, outweighing continued cuts from global oil majors such as Exxon Mobil Corp and Total SA, BMI said, based on company guidance and its own estimates. Spending will increase to a total of $455 billion (Dh1.7 trillion) next year from $444 billion this year, BMI said.

“We expect global spending in the oil and gas sector will reach its nadir in 2016, returning to growth in 2017,” Christopher Haines, BMI’s head of oil and gas research, said in the report. “For now, we see stronger growth in capital expenditure in 2018, as better forecast oil prices are building confidence behind spending outlooks.”

BMI’s outlook is more optimistic than groups like the International Energy Agency, which said last week that the industry might cut spending in 2017 for a third year in a row as companies continue to grapple with weaker finances.

Oil prices still hover around $50 a barrel, less than half the level of the summer of 2014.