Industry Trend Analysis - NOC Capex Will Fall 5% In 2017 - JUNE 2017

BMI View: National oil companies will maintain their more austere approach to spending in 2017 due to oil price weakness. Whilst investment will fall by an estimated 5.0% y-o-y, a greater proportion of funds will be diverted upstream, counteracting budget curtailments to an extent.

Latin America has been the most adversely impacted region with respect to oil and gas spending since the start of the crude price downturn. The state's heavy reliance on the oil sector meant many of the region's national oil companies (NOCs) were forced to slash investment as export revenue dried up. Over the past two years, NOCs - which operate the vast majority of the region's output - have cut over USD20.0bn in investment, representing a near 30% decline from 2015.

The region's largest NOCs recalibrated their spending plans in 2016 to better manage the impact of lower revenues, a strategy that will extend into 2017 and beyond. We estimate capital expenditures among the largest NOCs in Latin America will fall an additional 5.0% y-o-y in 2017 to USD44.8bn and will remain largely flat in 2018.

No Spending Recovery In Sight
Capex by NOC (USDbn)
g=long-term guidance estimates, e=BMI estiamate. Source: Company data, BMI

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