China's Oil Majors Set to Lift Capex for First time in Years

Source: Reuters 1/26/2017, Location: Asia

China's oil majors are expected to pump up spending in 2017 for the first time in years, scrambling to squeeze more barrels of crude out of ageing domestic wells in the hope that higher prices are here to stay.

State-run explorer CNOOC Ltd set the tone this month. After an international output cut agreed late last year lifted benchmark Brent crude futures to a peak of nearly $58 a barrel, not seen for 18 months, CNOOC said it would spend as much as $10 billion, up to 40 percent more than 2016.

Industry executives and analysts say that increase - the first in CNOOC's annual spending since 2014 - is likely to be followed by peers in a sharp turnaround after sliding crude prices led to years of job and budget cuts across the world's top energy market.

'We believe $50-$60 will be the new normal for the next couple of years,' said Wang Haitao, chief executive of privately run Chinese oil service and equipment firm Kerui Group. 'Once oil is above $50, it's not longer a pessimistic figure.'

Industry experts expect energy giants PetroChina Co and Sinopec Corp will likely follow suit in investments centered on arresting declines at lower-risk, mature oilfields rather than ramping up any new oil production. With the global oil market still vastly oversupplied, developing natural gas fields will take priority for the time being, they said.

PetroChina and Sinopec are expected to announce capital spending in late March.


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