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Global E&P Spending May Rise for 1st Time in 3 Years

Wood Mackenzie said investments in exploration should reach about $50 billion, growing further still in 2020 to $60 billion.Wood Mackenzie said investments in exploration should reach about $50 billion, growing further still in 2020 to $60 billion.

Following a couple of years of reduced exploration and production investments, spending by global oil and gas companies is expected to increase by 7% in 2017, for the first rise in three years, according to a Barclays survey of 215 global oil and gas companies.

“With OPEC putting a floor on oil prices, operators have greater confidence to drill and complete, although the early stages of the recovery will be uneven,” a Barclays report was cited by Oil Price. North America’s oil firms will lead the recovery in spending with an expected 27% increase, according to the banking services company, which carried out the survey when oil prices were trading around $55 per barrel for Brent and at around $50 per barrel for West Texas Intermediate Crude.

Still, production is seen dropping on the back of higher service costs that are expected to offset the increased-budgets effects, according to Barclays. Offshore E&P spending would still suffer, with spending seen down by 20-25% this year, versus an expected drop of 34% for last year.

According to a Wood Mackenzie report from December 2016, oil and gas exploration investment will slump further in 2017 to $37 billion, which would be the lowest exploration investment level since at least 2009. To compare, in 2014, exploration investment hit $100 billion.

In 2018, however, things will start recovering, Wood Mackenzie said, and by the following year, investments in exploration should reach about $50 billion, growing further still in 2020 to $60 billion.

In the global corporate outlook for 2017, Wood Mackenzie expects that the oil and gas industry's cash flow will turn  positive for the first time since the downturn, should OPEC production cuts push oil prices above $55.

Assessing this year’s prospects for oil majors, independents and national oil companies, Wood Mackenzie has singled out five trends to look for in 2017: strengthening finances will be a top priority; US independents will lead the sector into a new investment cycle; portfolios will adapt; production will rise modestly despite past capital expenditure cuts; and there will be improved value proposition for exploration and mergers and acquisitions.

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