High oil prices will help push 2012 global energy exploration and production (E&P) spending to a record high of $598 billion, but the rate of growth will slow from a year ago in part due to wariness about continued economic uncertainty, Barclays Capital said on Monday.
The $598 million is up 10 percent from $544 billion this year, analysts at Barclays found after surveying 350 oil and gas companies.
International spending is forecast to rise 11 percent year-on-year, while in North America spending is expected to rise 8 percent. That compares with international spending growth of 20 percent in 2011, and spending increases in North America of 31 percent then, the survey found.
The year-over-year slowdown in growth can be attributed very conservative forecasts from the companies and other factors, James West, oil services analyst at Barclays told reporters on a conference call.
"I think that the budgets that look like they've slowed are somewhat misleading because companies are being very conservative," West said. "In 2011 we were coming out of a downturn and companies were really anxious to get back to work."
Barclays said that if oil prices were sustained at the current level, there could be "considerable upside" to their forecast.
On Monday, North Sea Brent crude futures were trading at $109 a barrel and U.S. light crude futures were around $100 a barrel.
The largest oil companies are expected to spend the most with Exxon Mobil Corp seen pouring more than $30 billion into exploration and production. PetroChina Co Ltd is expected to be the second largest spender with expenditures approaching $30 billion, the survey found.
SPENDING SEEN UP 42 PCT IN EX-SOVIET BLOC
E&P spending should rise most meaningfully in Latin America, Africa, Europe, the Middle East and Russia, Barclays said. Capex on E&P is seen rising 21 percent in Latin America, 14 percent in Africa and 42 percent in the former Soviet Union and CIS countries.
In Latin America, BarCap highlighted a "significant step up in activity" by state-run oil firm PEMEX in Mexico, an aggressive capital program for Ecopetrol in Colombia, and Brazilian Petrobras' continued deployment of capital in support of its pre-salt development plan.
Spending in Africa is projected to rise next year as civil unrest and political disruptions in North Africa and other areas abate, and as the supermajors begin work on large projects and new discoveries in East and West Africa, BarCap said.
Higher oil prices are driving this spending, but companies' conservative estimates leave the door open for more. BarCap said oil and gas companies were basing their 2012 capex budgets on an average oil price of $87 a barrel for U.S. crude and $98 a barrel for Brent.
As a result of this pick up in spending, BarCap sees oil service, equipment and drilling companies significantly outperforming the broader equity market over the next few years.