Global upstream capital and operating expenditures (CAPEX and OPEX) are set to reach a combined record of $1.23 trillion for 2012 and expected to rise to $1.64 trillion in 2016, according the latest IHS Upstream Spending Report. CAPEX on new projects and OPEX on existing plays are expected to reach new records of $728 billion and $500 billion in 2012, respectively.
The quarterly IHS Upstream Spending Report tracks historical spending and builds out future spending projections based on detailed analysis of the construction timing for hundreds of major projects across the globe. The analysis forecasts spending over a five year period and is split by onshore and offshore, region, and by business segment to provide an overview of spending patterns and key trends across the global oil and gas industry.
Spending increases are projected for each region of the globe, according to the report, reflecting a large increase in activity across the oil and gas industry as sustained high oil prices (and gas prices outside of North America) remain well above breakeven levels for most proposed oil and gas projects. At the same time tighter markets are leading to high project cost inflation worldwide.
"The brief lull in expenditures in 2009 and 2010 caused by the Great Recession is behind us. Robust oil prices and the growth of North American unconventional gas—which already accounts for $128 billion in 2012 spending—will create new high water marks for investment in CAPEX and OPEX that surpass pre-recession highs," said David Hobbs, IHS Chief Energy Strategist. "Understanding where spending is headed will be critical for both buyers and sellers in the supply chain to meet market needs."
North America leads all regions with total upstream spending (CAPEX and OPEX) of $392 billion in 2012. CAPEX is expected to reach $274 billion in 2012, driven by the region’s boom in unconventional production including oil sands, tight oil, shale gas, tight gas and coal bed methane, which are forecast to account for $128 billion of the 2012 total. Driven by continued investment in unconventional resources, total North America spending is expected to reach $528 billion in 2016.
The Asia-Pacific region follows North America with $238 billion in total 2012 upstream spending, comprised of $169 billion CAPEX and $69 billion OPEX. This total is expected to rise to $323 billion in 2016. While onshore projects are the primary driver for North American spending growth, the prominent source of the rise in Asia-Pacific spending is offshore. Asia-Pacific currently has the highest 2012 offshore spending of any region at $104 billion, of which $67 billion is CAPEX. The region will also be a key contributor to growth in global offshore CAPEX going forwards, driven by major offshore developments in the region, particularly offshore Australia. Offshore CAPEX for all regions is estimated to reach $213 billion in 2012, well above the 2008 peak, and are projected to reach $297 billion in 2016, of which the Asia-Pacific region will represent 31percent.
Additional Key Findings
Onshore and Offshore Findings:
Business Segment Findings:
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