BAKU, Azerbaijan, Jan.21
By Leman Zeynalova – Trend:
Global oil and gas capex is expected to increase by 6 percent y-o-y in 2021 to $448 billion after an adverse 2020 saw investments fall by 25 percent, Trend reports citing Fitch Solutions.
The company said the impacts from Covid-19 on global oil demand and prices will continue to cloud the investment outlook. “Despite a strong recovery in prices lead by OPEC+ market management and expectations for a broad global economic recovery in 2021 leading to higher fuel demand, oil and gas investment remains subdued across most markets. In our last report we anticipated stronger growth in 2021, however, the most recent company guidance is less optimistic withchallenged balanced sheets and a cautious approach to spending on new production growth being taken.”
Total global investment for 2021 of USD448bn remains well below historic averages, according to the company.
“Of total investment this year, the oil & gas majors and the Middle East and North Africa (MENA) region have the highest amount of investment. Outside of the robust growth seen in the Asia region, both the majors, with a decline in capex of 6 percent y-o-y, and the Middle East and North Africa region, with growth of 7.8 percent y-o-y, are well below their 2019 totals by 24 percent and 20 percent respectively.”
As both the majors and MENA account for the bulk of production by category in our survey, this fall in investment signals an impending and perhaps sustained slowdown in production is looming, said Fitch Solutions.
“By our estimates, the Asia region overtook MENA in oil and gas investments in 2020 as state-led NOCs cut capex less than their MENA counterparts. Although we do not expect the trend to continue over the long term given Asia’s lower resource base and higher marginal costs, NOCs' focusoninvestingin domestic resources and capacity will remain key element of future investments.”
As IOCs depart less profitable acreage through divestment mainly in mature basins, NOCs and indigenous firms will be left to carry out development activities to support resource extraction, the company said.
“The investment for these local projects will likely be less in terms of total capex as well as scope, which will dictatethat production is likely fall in the long term for most countries. However, in exceptional cases, such as those in China,funded efforts may see increased exploration and production activities supporting higher upstream production and wider downstream integration across regional markets.”
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