Global exploration and production capital expenditures will increase by 9.3% this year to a record $595 billion, according to the most recent Original E&P Spending Survey by Dahlman Rose & Co. LLC.
The semiannual survey, which included 460 companies and was initiated by analyst James Crandell in 1982, found that E&P spending will climb by 11% in the US to $141 billion this year.
In Canada, E&P spending will rise by 5.3% to $42.8 billion, excluding mining-related spending in oil sands projects. Spending elsewhere will increase to $411.4 billion from last year’s $376.5 billion.
In the US, this year’s spending increase will be driven by horizontal drilling for oil or liquids-rich gas in such plays as the Eagle Ford shale, the Permian basin, and the Bakken shale. Dry gas drilling is expected to once again decline due to the ongoing weakness in natural gas prices, according to Dahlman Rose.
Outside the US and Canada, the boost in spending will be led by Chevron Corp., BP PLC, and Total SA in contrast to spending during 2000-08 when E&P spending growth was led by national oil companies. So far in the current cycle beginning in 2011, E&P spending growth has been driven by international oil companies, according to the report.
Spending growth by companies based in Latin America will slow materially this year, Dahlman Rose said, as E&P spending by Petroleos de Venezuela SA continues to recover but spending by Petroleo Brasileiro SA and Petroleos Mexicanos grows only modestly.
The survey found that spending in the Middle East this year will be led by strong increases by Kuwait Oil Co., with more moderate increases by Saudi Aramco and Qatar Petroleum.
Due to a sharp drop in E&P spending by Gazprom, E&P spending in Russia now appears to be flat in 2012, the survey found. Gains by the majority of companies reflect higher oil prices and favorable economics, but Gazprom has reduced E&P spending substantially to fund a significantly higher dividend.
The Asia-Pacific and Australia region is shaping up as one of the strongest areas for 2012, the report said. A 15% gain in E&P spending is forecast for the coming year in the region, as strong gains are expected from Sinopec, Inpex, BHP Billiton, and Santos Ltd. Spending by PTT Exploration & Production Public Co. Ltd. and Woodside Petroleum Ltd. is expected to decline.