Investment in Natural Gas Loses its Shine

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Total upstream capital spending continued to rise in 2013, but while investment in oil-related projects is up, capital spending in upstream natural gas is falling.

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Total upstream capital spending continued to rise in 2013, but while investment in oil-related projects is up, capital spending in upstream natural gas is falling. What's more, the overall rate of increase in upstream capital spending is losing momentum, prompting the question of whether we are seeing the early signs of a cyclical downturn in capital spending following a decade of strong growth. That's according to an Evaluate Energy analysis of the latest company capital expenditure data for 2013. This analysis adds more granularity to the EIA's analysis of upstream capital spending that used Evaluate Energy's data last month.

Companies do not generally report the split between capital expenditure (capex) on oil vs gas related projects. So we have created a couple of peer groups for this analysis: one oil-weighted group of 85 companies (see note 1) whose oil production forms more than 75% of their total oil and gas output and another gas-weighted group of 29 companies (see note 2) whose natural gas production forms more than 75% of their output.

For the purposes of this report, we have studied the capex of the oil-weighted group since 2007. These companies accounted for US$250 billion of capex in 2013 and their total capex has been rising in absolute terms in recent years. However, the rate of growth in oil capex has been slowing, a trend that looks like it will continue as margins continue to be squeezed.

Article title
Source: Evaluate Energy


For the gas-weighted group, we can see that both the rate of growth and the absolute level of capex has been falling. As many of the companies in this group are based in the United States, this trend partly reflects the downturn in gas-focused capital projects as gas prices remain low.


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