Global Oil And Gas Capital Expenditure Outlook - 2010: National Oil Companies (Nocs) To Drive Investment

Global Oil and Gas Capital Expenditure Outlook –Countries, 2005–09
2010: National Oil Companies (NOCs) to DriveCorporate M&A Deals Will Drive M&A Investment in
Investment2010
New report “Global Oil and Gas Capital ExpenditureThe second half of 2008 was a highly volatile period
Outlook - 2010 National Oil Companies (NOCs) to Drivefor the global oil and gas industry. Following the high
Investment” provides an in-depth analysis anddeal activity in 2007, global mergers, acquisitions and
insights into oil and gas sector capital expenditureasset transactions started to fall in 2008. The fall in the
outlook for 2010. The report provides a detailedcommodity prices, the credit crisis which led to the
analysis of the current and future capital expenditurefinancial crisis and the global economic recession
position of national oil companies, and integrated, anddecreased the appetite for deal activity by the end of
independent oil and gas companies. It presents detailed2008. Deteriorating asset values caused more financial
Information and analysis of capital expenditure in oil anddifficulties leading to a decrease in the ability of the
gas segments; Upstream and Midstream. It alsofinancial institutions to continue lending which is hindering
provides detailed information on capital expenditurethe flow of required investments across industries. The
across various regions; North America, South andglobal economic slowdown resulted in reduced
Central America, Europe, Middle East & Africa anddemand for oil and gas. As a natural response to the
Asia-Pacific. The report also covers the planned oil andfalling demand, the appetite for risk decreased leading
gas projects in upstream, refining, pipeline, LNG andto a low deal activity from the fourth quarter of 2008.
petrochemical projects.With crude oil prices stabilizing above $75 a barrel,
Global Oil and Gas Sector Spending to Rise 12% inM&A activities are expected to increase in 2010 with
2010, Driven By NOCs’ Investmentsthe Chinese and Indian NOCs expected to be the
A drop of over $100 per barrel in oil prices late lastmajor players. These companies will look to acquire
year bringing it to around $32 per barrel promptedoverseas assets to expand their footprint and secure
many national oil companies, which depend on oil forfuture energy supplies. The unconventional resource
most of their revenue, to cut spending, delay anddeposits will offer significant growth prospects and
cancel oil and gas projects. However, most NOCsattract huge investments from both International Oil
have the necessary financial strength to fund theirCompanies (IOCs) and NOCs.
capital-intensive projects and they continued to spendFigure 3: Oil & Gas Deals By Industry, Number Of
during the ongoing economic downturn. The capitalDeals and Deal Value, 2008Q1–2009Q4
expenditure of oil and gas companies witnessed aGlobal refining industry’s capacity growth will be
significant decrease in 2009 after the surge indriven through NOCs
2007–08. However, in 2010 capex activity isThe global refining capacity has grown at an AAGR
expected to rise, driven mainly by large National Oilof 1.05% from 2000 to 2008 and is expected to grow
Companies (NOCs). Oil and gas spending in 2010 isfurther at an AAGR of 3.5% from 2008 to 2013,
expected to increase largely driven by: Chinabased on committed projects. In the next few years,
Petroleum & Chemical Corporation, Ecopetrol, Petroleothe global refining industry’s capacity growth will be
Brasileiro S.A., Petroleos de Venezuela S.A., Petroleosdriven through NOCs while poor market conditions will
Mexicanos (PEMEX), PetroEcuador, PTT Explorationreduce private company investments. The global
and Production Public Company Limited, Nigerianrefining industry has traditionally been dominated by
National Petroleum Corp, Sonangol and Libya's Nationalprivate, independent oil companies (IOCs). Even after
Oil Corp. Modest reductions in spending are likely to bethe nationalization of the oil industry in many countries,
implemented by Saudi Aramco and Qatar Petroluemthese companies maintained their dominance by
Co.capitalizing on their technological competence. Many
Figure 1: Oil & Gas Spending, By Company Type, $countries, especially in Asia and the Middle East, have
Billion, 2010specific national priorities for pursuing refining projects.
Developing New Discoveries in More GeologicallyChina is going ahead with its refining projects to meet
Challenging Regions Will Entail Higher Capitalits surging domestic demand for refined products and
Expenditureto reduce dependence on imports. The Middle East is
In 2009, over 350 oil and gas discoveries wereinvesting heavily to become a major petroleum
announced worldwide. The majority of theseproducts export hub by utilizing its domestic heavy and
discoveries were in South and Central America (29%),sour crude as well as satisfying its increasing domestic
followed by Middle East & Africa (26%), Asia-Pacificlight distillate demand. Such national objectives are
(23%), Europe (18%) and North America (5%).being met through the NOCs in these countries. For
Petrobras was the leading company with 50example, Iran is planning to invest $10-15 billion on
discoveries. To capitalize on the new discoveries,building new refineries and renovation of existing
companies will be required to increase their capitalrefineries. Future investments and refining capacity
budgets for 2010 and beyond. Some of thegrowth will be driven by NOCs as they will be
discoveries in Angola, Brazil and Nigeria requirefinancially supported by national governments to
significant development and lifting costs, which requirepursue their cost intensive refining projects. Seven of
a long-term oil price in excess of $70 per barrel.the top 10 planned refineries in the next four years are
Figure 2: Number of Oil & Gas Discoveries By Topoperated by national oil companies.