North America upstream spending outlook

Oil industry costs will improve as activity recovers, but with only modest expected gains until 2020.

Regional North American upstream oil and gas spending is expected to bottom out at USD113 billion in 2016, before increasing again to USD130 billion in 2017.

IHS Energy's Costs & Technology team makes quarterly updates to its bottom-up analysis of upstream project activity and its forecast of nominal capital and operating spending. Its North America Upstream Spending report is part of a set monitoring upstream oil and gas trends and technology costs. The latest update following H1 2016 provides some key indicators on the upstream oil and gas outlook:

• North American upstream oil and gas spending and activity are currently reaching a trough and we expect slight gains towards the end of 2016 and into 2017.
• Despite continued gains expected, spending is still expected to only reach approximately two thirds of 2014 levels by the end of the decade.
• The recovery will take time. As in previous industry cycles, the sharper the downturn, the harder the lesson learned. The recovery will keep very wary investors and operators on their toes, and it will take time before spending picks up, regardless of the expected improvement in oil prices during the second half of 2016.
• Oil industry costs will improve as activity recovers, but with only modest expected gains until 2020.
• Offshore spending is expected to recover faster for North America, reaching 2014 levels by 2020.

To learn more about how you can expertly forecast upstream oil and gas spending or understand oil and gas trends, download an excerpt of a report or purchase a one-off upstream cost and technology report immediately from the IHS Markit Online Store.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.