Global upstream capital spending in 2010 likely will exceed $380 billion, led by a "spectacular" recovery in the United States, Wood Mackenzie said in a new report.
Total upstream spending in the United States "should return close to peak levels by 2010," the consultant said in its latest research report "On the Rebound: Global Upstream Spending Returns to Growth."
The U.S. recovery "is primarily due to restored confidence and an impressive renewal of activity in unconventional resources, particularly shale gas," said Wood Mackenzie's Iain Brown, who manages regional upstream research. "Leading growth areas include the northeastern U.S. -- where spending could exceed U$11 billion in 2013, from around US$3 billion in 2009 -- and in the U.S. Gulf Coast, as operators aggressively develop the Haynesville and Eagle Ford shales using horizontal drilling."
Companies' investment plans indicate a renewed confidence in many regions and sectors of the upstream industry, but Wood Mackenzie found that the recovery isn't uniform.
"It is clear from our understanding of operators' plans in the autumn of 2010 that confidence has returned to many regions and sectors of the industry, although this effect is far from consistent across the world," said Brown. "We estimate that total upstream spending will recover to around $380 billion in 2010 -- $19 billion higher than in 2009 but still 10% lower than the historical high of 2008. This revival is set to continue over the next three years and global spending could recover to 2008 levels by 2012 or 2013."
The economic downturn in late 2008 "shook the foundations of the global upstream business," said the Wood Mackenzie expert. "Many higher cost capital projects were delayed, shelved or abandoned, and annual spend dropped by over $55 billion. Now, just one year on, the industry has proven remarkably resilient. Many plans have been restored or expanded, in the expectation that demand and commodity prices will remain relatively robust over the longer term."
Record growth in capital spending is already under way in Australia, where new project approvals and major gas developments will see capital expenditure grow three-fold by 2013, the report said. In Iraq upstream investment is "likely to climb rapidly" to $10 billion in the next three years.
However, Brown warned that investment levels will take much longer to recover in some countries.
"Two of the world's largest producers, Canada and Russia, were most deeply affected by the global crisis, and upstream spending was reduced by around one-third through 2009," he said. "Both countries have experienced a modest recovery, but current plans suggest that spending will not return to 2008 levels until toward the end of the decade."
More than half of future upstream investment is expected to come from the multi-national majors and a "range of prominent national oil companies (NOC)."
"PetroChina has by far the largest upstream commitment amongst the NOCs, and its spending plans rank with the largest of the international majors," said Brown. "It has pursued an international expansion strategy in the past 10 years but still spends only 5% of its upstream budget on overseas projects."
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