Upstream spending to rise to $485 billion by 2023

Over the past three years, most US energy companies have avoided spending big to expand production in the aftermath of the 2020 oil shock, prioritizing returning more cash to shareholders in the form of dividends and share buybacks. Most oil and gas companies have only announced small increases in their capital spending for the current year and plan to increase production modestly as well.

But this means that these companies will not try to capitalize on oil prices that are holding at multi-year highs. In his outlook for 2023, Energy Intelligence notes that global upstream capital spending will reach $485 billion in the current year, representing a 12% year-over-year increase and a near 30% recovery from the 2020 trough.

The energy expert says spending is unlikely to reach the $700+ billion level seen during the 2013-2014 peak this decade, as most companies prefer to focus on the most advantageous “barrels.” , that is, lower cost and lower carbon projects faster. timelines NOCs, big independents and big westerners are returning to offshore games with advantages such as the Guyana Basin, Brazil, the Gulf of Mexico, the North Sea and West Africa, the regions that are also expected to boost most of the growth outside of OPEC.

Source: Energy Intelligence

Large oil and gas companies announce big Capex increases

Several large oil and gas companies have announced higher-than-average capital spending increases for 2023 and beyond. Last month, Chevron Corporation. (NYSE: CVX) announced that the fiscal year 2023 capital spending budget will be $17 billion, more than 25% of expected spending in 2022 and at the high end of its $15 billion medium-term range. to $17 billion.

The company said upstream capital spending includes more than $4 billion for development of the Permian Basin; ~$2 billion for other shale and tight sands assets and ~$2 billion for projects that reduce carbon emissions or increase renewable fuel production capacity, more than double the 2022 budget.

Although Chevron’s 2023 spending will be considerably higher than capital spending in the pandemic years 2020-21, it is still much lower than the $30 billion annual average of the 2012-19 period.

“Our investment budgets remain in line with previous guidance despite inflationsaid President and CEO Mike Wirth.

chevron mate ExxonMobil Corporation. (NYSE: XOM) hasn’t announced a drastic increase in spending, but has said its 2023 capex will be closer to the upper end of its $20B-$25B annual target, a level it expects to maintain through 2027.

Exxon says that more than 70% of its capital investments will be implemented in the US Permian Basin, Guyana, Brazil and LNG projects around the world. These investments will help increase the company’s upstream production by 500,000 boe/day to 4.2 million boe/day by 2027. Exxon also disclosed plans to increase spending on emissions reduction projects by 15% through 2027 to ~ $17 billion through 2027. Exxon also plans to expand its share buyback plan to $50 billion through 2024, including $15 billion in 2022. So where will all that money come from? Exxon waits”double earnings and cash flow potential” for 2027 compared to 2019, and also expects to deliver ~$9 billion in structural cost savings by the end of 2023 from 2019 levels.

Meanwhile, Canada’s third-largest producer of crude oil and natural gas Cenovus Energy (NYSE: CVE) has announced that it expects to spend C$4.3BC$4.5 billion in fiscal 2023, higher than estimates of C$3.3BC$3.7 billion for 2022, including ~C$2.8 billion of sustaining capital to maintain base production and support operations. Cenovus says it expects to spend C$1.2bn to C$1.7bn for optimization and growth, including construction of the West White Rose project in Atlantic Canada. Cenovus has also guided production of 800,000-840,000 boe/day in the current year, an increase of more than 3% per year, including oil sands production of 582,000-642,000 boe/day and conventional production of 125,000-140,000 boe/day. . Meanwhile, the company expects total downstream crude production to reach 610,000-660,000 bbl/day, up nearly 28% year-on-year.

Back in June saudi aramco revealed plans to continue increasing capital spending through the mid-2020s as part of its strategy to increase oil production capacity to 12.3 million barrels per day by 2025 and 13 million barrels per day by 2027. To support production growth, Aramco plans to allocate capital expenditures up to $50 billion, which will then increase from 2023 to 2025.

Brazilian oil and gas supermajor Petróleo Brasileiro SA or Petrobras (NYSE: PBR) has announced that it will increase investments from 2023-2027 by approximately 15% to $78 billion over the company’s projected spending for 2022-2026. Of the $78 billion planned for capex, 83% or $64 billion is earmarked for exploration and production activities, while 67% of the exploration and production capex budget will go to pre-salt activities. The company also plans to increase spending to reduce carbon emissions to ~6% of the total compared to 4% in the previous plan, and will see its decarbonization fund more than double the current $248 million.

Meanwhile, the Brazilian mining giant Ok SA (NYSE: VALE) has announced plans to increase capex to US$6bn in 2023 from US$5.5bn in 2022, while exploration spending is expected to reach US$350mn in 2026 from US$180mn by 2022. Vale says it expects iron ore production to rise only slightly to 320mt in 2023 from 310mt in the current year, but expects output to top 360mt by 2030. Meanwhile, copper production is expected to increase to 335K-370K tons in 2023 from ~260K tons this year while nickel production is expected to exceed 300,000 tons from ~180,000 tons in 2022.

By Alex Kimani for Oilprice.com

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