As recessionary pressures lessen, the global oil industry plans to increase spending for E&P expansion throughout 2011. According to “The Original E&P Spending Survey” produced by Barclays Capital, the budgeted price of oil for the companies surveyed was $72.32/barrel. Currently oil is roughly $88/barrel*. A key factor to continued E&P growth throughout 2011 will be the ability to sustain heightened oil prices.
According to James West, an energy analyst with Barclays, “This is being driven by the appetite to find more oil, comfort that today’s oil prices will be sustained and companies getting out of a hunker-down, recession mode.”
Current projections show global oil industry expenditures estimated at $490 million – an increase of 11% from 2010. Large players such as Chevron, BP, and ExxonMobil are expected to champion the increase in international spending. Larger budgets aim to increase deep-water development and LNG (liquefied natural gas) projects both domestically and abroad.
With a 29% budget increase, Chevron has expressed interest in developing offshore projects in Western Australia and the Gulf of Mexico. Approximately 35 new deep-water rigs are expected to be built in 2011 despite increased regulatory provisions for deep-water E&P. United States and Canadian E&P budgets plan to increase by 8.1% and 4.8% respectively. The rise in E&P expenditures should strengthen demand for contractors/suppliers as new wells and producing platforms expect to be developed. 2011 should prove to be an opportunistic year for E&P companies as major players’ fuel expansion with increased spending on a global level.