A mid-year survey of more than 200 companies shows that global upstream spending is poised to grow in 2017 after consecutive years of declines. The Barclays Upstream Spending Survey estimated that spending will increase by approximately 3% to 8% at current oil prices. Large-cap E&P companies are expected to increase North American CAPEX by as much as 50% next year, although international oil companies (IOCs) – particularly those in the offshore sector – will still be very cautious in their spending.
In North America, the survey shows that spending will decline by 37% this year. That represents a slight upward revision from -40% in March, due to stronger spending in the second half of 2016 that will drive momentum into 2017, according to Barclays.
Outside North America, spending is now expected to fall by 17% this year, versus an expectation of -21% in March. National oil companies are expected to reduce their spending by 13%, IOCs by 20% to 25% and international E&Ps by 15%. Looking at specific regions, the Middle East will lead with an approximately 3% increase in spending, while Latin America spending will fall by 33% and Russia/FSU by 6%. All other regions will be down by between 13% to 17%.
Looking at the offshore sector specifically, Barclays stated that it expects a 25% decline in offshore spending in 2017. This will be driven by dayrate reductions, contract cancellations and delayed rig deliveries.
In terms of costs, more than 75% of the survey respondents said they still expect well costs to decline over the next year. However, 52% of them expect cost reductions under 10%. Further, nearly 45% of respondents believe that only up to 25% of cost reductions achieved during this downturn are structural.
Respondents also said land rigs and pressure pumping will see the great cost inflation over the next year. Frac sand is expected to be a distant third, even though 50% of respondents said they expect to increase proppant intensity by as much as 40% from current levels.