Oil Capex Proportions

[Georg Meier + 3]

Hello, 

I just read a lot about capex cuts in the Oil & Gas upstream industry and how capex developed since 2014 

https://www.iea.org/data-and-statistics/charts/global-oil-and-gas-upstream-capital-spending-2014-2019

I was wondering whether there is a general ratio of how much of this capex is used for new projects and how much spending is invested in already running wells to keep them running, slowing depletion, or developing them further. 

 

Does anyone have any clue? I  could not find much via googeling.

Regards

 

Georg

[Georg Meier + 3]

No one any Idea?!

[Tom Kirkman + 8,860]

On 5/2/2020 at 1:51 PM, Georg Meier said:

Hello, 

I just read a lot about capex cuts in the Oil & Gas upstream industry and how capex developed since 2014 

https://www.iea.org/data-and-statistics/charts/global-oil-and-gas-upstream-capital-spending-2014-2019

I was wondering whether there is a general ratio of how much of this capex is used for new projects and how much spending is invested in already running wells to keep them running, slowing depletion, or developing them further. 

 

Does anyone have any clue? I  could not find much via googeling.

Regards

 

Georg

 

You are unlikely to find much about a "general" ratio of capex.  There is a difference in oil projects, from say... onshore oil projects in Saudi Arabia or Arctic Circle projects in Russia or offshore oil projects in South China Sea or fracking in USA.

You may wish to narrow down your broad question a bit.

[Georg Meier + 3]

On 5/6/2020 at 8:25 PM, Tom Kirkman said:

 

You are unlikely to find much about a "general" ratio of capex.  There is a difference in oil projects, from say... onshore oil projects in Saudi Arabia or Arctic Circle projects in Russia or offshore oil projects in South China Sea or fracking in USA.

You may wish to narrow down your broad question a bit.

Well ok maybe I did not formulate my question clearly enough. I understand that there re very different projects as you mentioned them. However, as I understand it there is a level of capex for an individual company as well as for the whole industry. And the same way the company spends some of its money on developing new projects there is also money spend on already developed projects to keep them running. 

The same must be true for the Industry as a whole. I understand that most probable this ratio is quite different for projects in siberia vs projects in the middle east or offshore projects in the gulf of mexico. Nevertheless there must be an average over the industry, mustn't it?!

 

Cheers

Georg

[Tom Kirkman + 8,860]

OK, that's a better way of narrowing down the general question a bit.

Note that the oil industry generally seems to act like a herd of cats, and there is no particular "industry standard" for the oil industry that I can recall seeing as far as capex levels.

Each oil major generally reviews each of their proposed major projects on a case by case basis, before doing a Final investment Decision (FID) and before proceeding.  There is no rule of thumb for capex levels that I recall seeing.  Instead, the criteria is generally ... will each project eventually make a profit, based on the the specifics of each project.  Cost / Risk / Return on Investment / Geopolitical hiccups are all bigger decision factors than capex levels.

That's just my general opinion and observations over the years, as I watched companies decide to go ahead or not go forward with major projects.

@ceo_energemsier any comments?

[ceo_energemsier + 1,818]

On 5/12/2020 at 3:19 PM, Tom Kirkman said:

OK, that's a better way of narrowing down the general question a bit.

Note that the oil industry generally seems to act like a herd of cats, and there is no particular "industry standard" for the oil industry that I can recall seeing as far as capex levels.

Each oil major generally reviews each of their proposed major projects on a case by case basis, before doing a Final investment Decision (FID) and before proceeding.  There is no rule of thumb for capex levels that I recall seeing.  Instead, the criteria is generally ... will each project eventually make a profit, based on the the specifics of each project.  Cost / Risk / Return on Investment / Geopolitical hiccups are all bigger decision factors than capex levels.

That's just my general opinion and observations over the years, as I watched companies decide to go ahead or not go forward with major projects.

@ceo_energemsier any comments?

Hi Tom,

How have you been.

You are pretty much accurate on that. We have seen that sometimes oil companies (older, experienced, and non experienced, newbies, and fly by the night start ups) do get into a herd mentality and going on a buying spree and then going belly up when the numbers dont add up and they paid way way way too much for assets/leases.

Most companies have their own internal sets of criteria for investments in a certain type of oil/gas project, nothing set across the industry as a standard.

Georg should email the IR folks at all the major companies and ask them HAHHA!!

Edited May 26, 2020 by ceo_energemsier
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