Oil firms set to ramp up investment in 2017: Wood Mackenzie

Oil companies look set to boost investment in exploration and production (E&P) activities this year, marking a recovery from the two-year slump in spending after crude prices crashed in mid-2014, energy consultancy Wood Mackenzie said its upstream outlook for 2017.

“E&P spending will grow by 3 percent to $450 billion. Yet this is still 40 percent below the heady days of 2014, reflecting deep cost-cutting and a move toward smaller, more incremental projects,” the report said.

While smaller U.S. oil producers are expected to scale up spending in response to rising crude prices, bigger players will continue to trend down.

“The Majors’ combined development investment is expected to fall by around 8 percent as spend in recent capital-intensive projects winds down,” it added.

The number of final investment decisions (FID) on new upstream projects is expected to double this year.

Deepwater projects, however, remain more challenged.

“Many of the projects slated for FID in 2017 are competitive with tight oil, but many longer-term deepwater pre-FID developments are still out of the money,” the report said.

Production is expected to grow modestly by an average of 2 percent, Wood Mackenzie said, adding that all eyes will be on how quickly the US tight oil sector responds to rising prices.

Production declines in US tight oil is likely to bottom out in the first quarter of this year. “We forecast output to grow by 300,000 barrels per day over the course of 2017,” the agency said.

From a corporate perspective, companies are forecast to “move beyond survival mode” after having cut breakevens in half in 2016.