Upstream projects ‘will rise five-fold,’ says report

The number of new oil and gas projects will rise five-fold next year from a 2015 trough, but overall spending is still unlikely to be enough to meet future demand, consultancy Wood Mackenzie said in a report.

Shaken by a sharp drop in oil prices in recent months, boards are generally expected to stick to spending discipline imposed following the 2014 price crash.

Global investment in oil and gas production, known as upstream, is expected to reach $425 billion next year, according to WoodMac analyst Angus Rodger.

That compares with a total spending of $770 billion in 2014, which dropped to $400 billion in 2016 and 2017.

Although spending levels have slightly recovered since then, next year’s capital expenditure will still fall short of the $600 billion required to meet demand growth and to offset the natural decline of output from fields, Rodger said.

A handful of the world’s top oil companies, including US giants Exxon Mobil and Chevron, said that they would boost spending next year as they accelerate developments of highly productive shale fields.

But, overall, companies will seek to keep spending largely flat in order to return cash to investors after years of pain, Rodger said.

Still, deep cost cuts introduced in recent years, and lower rates for drilling rigs and services mean that companies can do more with their money.

In 2019, the number of large new oil and gas projects is expected to reach up to 50, compared with 40 in 2018, and around 10 in 2015, according to WoodMac’s 2019 outlook. Large projects hold over