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Oil and Gas Industry to Spend More in 2017

Friday, January 20, 2017

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Big new oil and gas projects will double worldwide in 2017 as companies increase their spending, according to one global consulting firm.

Wood Mackenzie reported last week that it expects the coming year to be the first since 2014 to show growth in the oil and gas sector worldwide. Upstream activity—exploration and production—is expected to rise by a modest 3 percent, to $450 billion. That market dropped rapidly in 2015 and 2016, slashed by more than 40 percent over that period.

Offshore rig
© iStock.com / pichitstocker

Wood Mackenzie sees a positive outlook for deepwater development in 2017.

"The global investment cycle will show the first signs of growth in 2017, bringing the crushing two-year investment slump to a close," said Malcolm Dickson, principal analyst for upstream oil and gas at Wood Mackenzie.

Big Projects Increase

The firm predicts that final investment decisions on projects of greater than 50 million barrels of oil equivalent will double, from less than 10 per year in 2015 and 2016 to more than 20. Industry FIDs averaged around 40 per year from 2010 through 2014, according to the report.

Onshore projects in the U.S. will continue to “do more with less,” the firm says, noting that U.S. drillers have sped up well completion by 30 percent in recent years. This could be the legacy of the recent economic downtown in the U.S., which forced the industry to operate leaner.

oil and gas FIDs
Wood Mackenzie

The firm predicts that final investment decisions on projects of greater than 50 million barrels of oil equivalent will double, from less than 10 per year in 2015 and 2016 to more than 20.

Spending in the lower 48 states is expected to rise 23 percent, to $61 billion, according to the report, and could increase even more depending on oil prices and the early effects of the new presidential administration and Congress.

Deepwater Positives

Wood Mackenzie also sees a positive outlook for deepwater development, which it says will in some cases be competitive with tight oil. New projects for 2017 look to be in good shape financially, according to the report, but the pipeline of project for further out is questionable.

"The industry has selected the best projects to optimize and take forward. In 2017, it will have to turn its attention towards optimizing the next wave of developments to get them sanction-ready," said Dickson.

Turnaround Underway?

The predictions are backed up by data released earlier this month by the American Petroleum Insitute, showing that total wells drilled in the U.S. in the fourth quarter of 2016 dropped by only 8 percent, an improvement over the fourth quarter of 2015, when well projects dropped by 21 percent. The API says the slowing of the decline may be evidence of a turnaround in the American oil and gas industry.

   

Tagged categories: Asia Pacific; Economy; EMEA (Europe, Middle East and Africa); Latin America; Market; Market forecasts; North America; Offshore; Oil and Gas; Pipeline; Program/Project Management

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