Spending for oil companies worldwide is expected to skyrocket this year. Barclay’s estimated oil companies will spend $678 billion globally in 2013. That figure is up 10 percent from last year. Most of the money will be used for expanding international markets.
PetroChina is expected to spend $36.6 billion in the next year, coming out ahead of Exxon Mobil’s expected $33.9 billion. The companies’ actual spending will likely exceed the estimates, as Barclay’s only underestimated oil spending once. That mistake occurred in 2010 after the Deep Water Horizon accident that put a freeze on drilling in the Gulf of Mexico.
Oil companies’ spending has continued to grow while oil production shrinks, meaning oil companies have to spend more money for every drop of gasoline they produce with each passing year. Oil companies are also increasingly dependent on drilling in remote offshore locations in inhospitable places like the Arctic, circumstances that make drilling even more expensive than its been in the past. “The era of easy oil is over,” Barclay’s said.
Oil spending has exploded in recent years. Between 1985 and 1999, global oil production grew 25 percent while spending increased by 40 percent. In the years since 1999, oil production has increased another 25 percent, but spending has grown a whopping 640 percent in that time.
Exxon Mobil will likely spend part of that $33.9 billion in a project to expand drilling in Alaska’s North Slope. While the company hasn’t given any official statement about the project, ConocoPhillips (NYSE:COP) and BP p.l.c. (NYSE:BP) have revealed plans to expand drilling off the Alaskan coast in the Prudhoe Bay. BP and ConocoPhillips announced their intentions to drill in Alaska after Governor Sean Parnell cut oil taxes. For any drilling to occur at Prudhoe Bay, all three companies need to buy in.
Despite PetroChina’s huge predicted spending, Barclay’s still believes that U.S. gas and oil companies will be the most successful this year due to their dominance as technology leaders, the U.S. onshore production boom, and their success in international markets.