Editor's column Higher oil prices, continued enthusiasm over shale, and the influx of capital are combining to paint a bright picture for the oil and gas industry this year. Both operators and the service sector appear optimistic for growth opportunities—despite some uncertainty surrounding offshore drilling—as the industry quickly rebounds from recession. The Original E&P Spending Survey by Barclays Capital forecasts that global E&P spending will increase 11% this year, from USD 442 billion in 2010 to USD 490 billion in 2011. The survey is based on information from 402 international oil companies, national oil companies, and independents. The outlook for spending in Latin America, the Middle East and North Africa, and Southeast Asia appears particularly bright. International oil companies will post the largest increases in spending, says the study, a reversal from previous years when national oil companies led spending increases. BP, Chevron, ConocoPhillips, ExxonMobil, Shell, and Total are expected to boost expenditures by 18% in the aggregate. Factors driving the increased spending by operators include engineering and construction spending for several large liquefied natural gas projects, increased spending in Iraq, and an increase in deepwater activity, the report said. A recent Wood Mackenzie analysis reported that global upstream capital spending for 2010 would hit USD 380 billion and that many regions and sectors of the upstream industry are regaining confidence. Spending last year was about USD 19 billion higher than in 2009 but 10% lower than 2008. The Wood Mackenzie report said it expects spending to continue to increase in the short term and recover to 2008 levels by 2012 or 2013. The industry’s recovery is largely being led by spending on developing unconventional resources such as shale, the report said. Although most of the spending to date has been in developing US shale plays, operators are increasingly eyeing opportunities in Eastern Europe and elsewhere. Also boosting recovery is the influx of capital. More than half of chief financial officers (CFOs) in the oil and gas industry report that their companies’ ability to access capital and credit is either the same or better than it was a year ago, according to a study by BDO USA, an accounting and consulting organization. That renewed access to capital is allowing companies to aggressively pursue the acquisition of new properties, technologies, and other companies. In addition, 95% of the CFOs surveyed expect to maintain or increase the number of personnel employed by their companies this year. The oilfield services sector also appears healthy. The annual IHS Herold Review of the Oil Field Services Sector reported that key oil company financial performance for service companies by late last year had greatly improved, including for Baker Hughes, Halliburton, and Schlumberger as well as for offshore drilling contractors Transocean, Diamond Offshore, and Oceaneering International, among others.
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