Global capital spending jumps, says IHS Herold report

US and Latin American acquisition moves drove the total global upstream capital spending for 221 oil and gas companies up by 47% to $558 billion in 2010 says an IHS report.

Offshore staff

NORWALK, Connecticut – US and Latin American acquisition moves drove the total global upstream capital spending for 221 oil and gas companies up by 47% to $558 billion in 2010 says an IHS report.

The “IHS Herold 2011 Global Upstream Performance Review” noted that the significant increase in capital spending was primarily due to a seven-fold increase in acquisition spending to $125 billion, which is up from nearly $18 billion in 2009. Most of this spending occurred in the U.S. and in South and Central America, which each saw total upstream spending increases of approximately 130% to $195 billion and $91 billion, respectively.

Worldwide oil and gas reserves grew by 3% in 2010 to 286 billion boe, which matched the growth rate for 2009, while U.S. reserves increased 10% to 51 billion boe in 2010. Oil and gas production grew 5%, with gas output growing slightly faster than oil, noted the IHS Herold Global Upstream Performance Review.

According to the IHS Herold M&A database, approximately 10% of worldwide proved acquisition spending in 2010 was targeted toward deepwater reserves, while another 11% was devoted to proved unconventional reserves. However, the lion’s share of spending in both of these areas is still highly focused on non-proven resources.

Reserve replacement and finding and development costs rose by approximately 50% in 2010 to $16.45/boe and $18.25/boe, respectively, primarily due to the surge in unproved acreage purchases, which have no reserve additions associated with them. Reserve replacement and finding and development replacement rates softened in 2010, but remained well above full replacement levels at 160% and 128% of production, respectively. Reserve replacement through the drill-bit was particularly strong in the U.S., coming in at 224% of production in 2010.

12/05/2011

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