New oil projects to double in 2017, WoodMac says

CNBC_logo.svgCNBC | January 11, 2017

Oil and gas companies will increase spending in 2017 and more than double new project developments as they gain confidence that a two-year oil price slump is behind them, consultancy Wood Mackenzie said.

The upbeat outlook follows a more than 20 percent rise in benchmark crude oil prices in the past two months to around $55 a barrel on the back of an agreement by major producers to trim output.

"We've just come through two years of gloom and lots of costs cutting and now we are cautiously optimistic there will be a start of recovery in 2017," Malcolm Dickson, a principal oil and gas analyst at Wood Mackenzie, said.

According to WoodMac's global upstream outlook for 2017, exploration and production spending is expected to rise by 3 percent to $450 billion. This is still 40 percent below 2014 levels.

Geographically, the increased activity will vary hugely. U.S. shale oil production is expected to account for most of the gains because it is relatively cheap and quick to develop, in some cases it can take only 6 months.

Shale was the main driver of the recent supply glut and also experienced the sharpest declines in terms of output during the downturn.

Production in the most attractive shale areas, particularly in the Permian basin in Texas, is currently profitable with oil at $40 to $60 a barrel, according to WoodMac analyst Tom Ellacott.

U.S. shale oil production is expected to grow by around 300,000 bpd in 2017 to around 4 million bpd, according to WoodMac estimates.

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