Oil Firms Worldwide Plan Investments Worth $375 Billion in '09


"Most oil and gas companies. . .will spend more than half of their capital investment on upstream operations."

World's largest national oil companies (NOCs) and international oil companies (IOCs) are planning investments worth more than $375 billion despite ongoing concerns about oil demand, consultant Ernst & Young (E&Y) said in a report.

The view comes close on the heels of an International Energy Agency (IEA) statement, which warned that upstream oil investments will fall more than 21% this year due to projections of low demand. That would be a reduction of almost $100bn, the IEA said. While OPEC has forecasted a year-on-year decline of 1.6 mb/d in 2009, IEA said oil demand will fall by 3.5% this year.

NOCs are on course to invest more than $275bn in the development of their businesses at home and abroad in 2009, E&Y said. Of this almost 70% of total investment would come from NOCs in Asia and South America, the report said.

"Based on the current estimates, by 2015 the largest NOCs would have invested around $600bn in their hydrocarbon sectors," it said.

What's interesting in E&Y's prediction is that prominent IOCs will continue with their investments. "The supermajors have also committed to substantial investment in oil and gas activities this year—around $100bn," the report said.

Andy Brogan, global oil and gas transaction advisory services leader at E&Y and author of the report, said: "NOCs and supermajors continue to show a real determination to push ahead with their major capital expenditure plans this year, at least for now. The year 2008 was a record year for capital investment by the sector and 2009 is shaping up to be another record year. Companies are wary of finding themselves in a position where they have to play catch-up on investment when the upturn materializes."

He said despite IEA current estimates for oil demand, investment is still required in production capacity enhancement projects to offset falling output due to natural field depletion. "Most oil and gas companies have indicated they will spend more than half of their capital investment on upstream operations."

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