[Nigeria] Oil Firms to Increase Spending in 2017

The oil industry appears to be ready to open its wallet after two years of slashing investments, BMI Research, a Fitch rating company said.

This came on the hopes raised in the global market over Organisation of Petroleum Exporting Countries, OPEC, group reaching an accord last week on production cut back to boost revenue.

The research stated that companies will spend 2.5 percent more on capital expenditure next year than they did this year, the first yearly growth in such spending since 2014.

According to the report, "spending will increase by another 7 percent to 14 percent in 2018, indicating, however, that it will remain well below the US$724 billion spent in 2014, before the worst oil crash in a generation caused firms to cut back on drilling and exploration to conserve cash", the researcher said.

The report stated: "North American independent producers, Asian state-run oil companies and Russian firms are prepared to boost investments next year, outweighing continued cuts from global oil majors such as Exxon Mobil and Total".

Based on the companies' guidance and its research, BMI said spending will increase to a total of US$455 billion next year from US$444 billion this year.

"North America is where we're really expecting things to turn around," Christopher Haines, BMI's head of oil and gas research, told reporters, adding: "We've seen a push to really reduce costs, reduce spending and take out any waste and inefficiency.

"These companies have gotten to the point where they're all set up to react."

BMI's outlook is more optimistic than groups like the International Energy Agency, IEA, which said previous week that the industry might cut spending in 2017 for a third year in a row as companies continue to grapple with weaker finances. Oil prices still hover below USD$50/bbl, less than half the level of the summer of 2014.

Chakib Khelil, the former Algerian energy minister who steered OPEC the last time it decided to cut supply, had expressed confidence the group will reach an accord as low oil prices will force members to act in their interest.

www.allafrica.com