National Oil Companies (NOCs) are planning to spend US$275 billion on developing their businesses with the supermajors chipping in with a further $100 billion according to a report released by Ernst & Young.
NOCs from Asia and South America lead the way with almost 70% of the total investment coming from those areas. The report also estimates that a total of $600 billion will be invested by NOCs by the year 2015.
“NOCs and the supermajors continue to show a real determination to push ahead with their major capital expenditure plans this year, at least for now,” Andy Brogan, global oil and gas transaction advisory services leader at Ernst & Young and author of the report said.
“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 materialises,” he added.
Brogan also added that investment in development is essential to maintain output and that half the capital investment will be spent on upstream operations.
China and Brazil are leading the field in NOC investment in 2009. Brazilian oil company Petrobras intends to spend $28 billion in 2009, a figure that represents 38% of the planned $91 billion being spent by South American NOCs. The China National Petroleum Corporation (CNPC) plans to spend $42 billion out of the $98 billion earmarked for investment by Asian NOCs.
NOCs in the Middle East are planning to spend $29 billion in 2009 although Don Painter, leader of Ernst & Young’s Middle East Oil & Gas practice, believes there is no need to hit the panic button.
“While public figures suggest that the investment Middle East NOCs have committed to this year is below the levels of NOCs in Asia and South America, there is still plenty of cash available in the Middle East for the right type of investment,” Painter said.
“Cash rich GCC producers are currently evaluating investment options that match their ROI aspirations. They are still seeking appropriate investment opportunities in the region and elsewhere. The slowdown in their capital expenditure does not reflect their appetite for major investments.”
