CEOs see recovery in global E&P spending

By OGJ editors
HOUSTON, Sept. 20
-- A group of chief executives of oil and gas companies and service firms sees recovery in international exploration and production spending but remains cautious about the Gulf of Mexico, says Barclays Capital.

In a summary of its CEO Energy Conference this month in New York, Barclays said speakers confirmed its belief that “a multiyear upcycle in international E&P spending is taking hold.”

Activity will remain weak during the third and possibly fourth quarters of this year in countries such as Mexico, Algeria, and Libya. But the weakness there won’t last into 2011.

“We expect growth to be particularly pronounced in 2011 in Brazil, Iraq, and Russia,” Barclays said in its summary.

Several speakers highlighted Brazil as “a key focus market,” Barclays said, citing expectations that Petrobras will order at least 7 deepwater drilling rigs in the first quarter of 2011 and as many as 14.

“We continue to believe that Iraq has significant upside, assuming the region remains safe,” Barclays said.

And Russia will “show strong growth in 2011,” it said.

In the US, E&P spending will be flat, and the Gulf of Mexico will remain weak in the near term.

“Oil service presenters at our conference are expecting the US market to move sideways through 2011 as continued demand for services in liquid-rich plays is potentially offset by a decline in natural gas-directed activity,” Barclays said.

Service providers at the conference were “generally negative” about the Gulf of Mexico.

“Most companies tend to believe that the moratorium will be lifted at the end of November,” Barclays said. “However, permit approvals have been slow to materialize for jack ups. It could take some time until drilling activity returns to a more normalized rate.”

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