Oil price drop fails to dent Gulf and Western capex

• US independents may cut spending
• Smaller producers more vulnerable
• Gulf-Western joint projects due

Gulf national energy companies and their Western rivals are likely to maintain their capital expenditure guidance for the year but independent US producers may cut spending as oil prices decline, analysts have said.

For now, Gulf oil and gas companies are sticking to their investment plans despite a drop of almost 15 percent in the price of Brent crude so far this year.

“The guidance for Gulf NOCs [national oil companies] is solid and unlikely to change,” Gregory Brew, senior energy analyst at Eurasia, told AGBI. 

“I don’t see revisions to their schedules even if prices fall, since there is at least some impetus among the Opec states to take advantage of low prices and pressure among non-Opec producers to retake market share after years of cuts.”

Saudi Aramco will keep its $52 billion to $58 billion guidance for 2025 and look for investment opportunities, its CEO said last week. Abu Dhabi’s Adnoc has left its 2023-27 spending plan of $150 billion unchanged.

Meanwhile, oil exploration and production spending in non-Opec+ countries is forecast to drop by 5 percent year on year in 2025 and 2 percent in 2026 to a little under $280 billion, Opec said in its May report, released last week.

As a result of the oil price decline, investment in US upstream exploration and in production of crude and other oil liquids is projected to fall by 9 percent in 2025 and 7 percent in 2026, Opec said.

Independent US oil producers have cut their 2025 capex by as much as 9 percent compared with previous guidance, the International Energy Agency said in its May report, published last week.

The Paris-based IEA also lowered its 2025 and 2026 US forecast for production of so-called tight oil, which is mainly light crude oil shale formations, for a second month.

“The smaller US midcap shale firms are much more sensitive to price volatility, as they are involved in short-cycle production and inclined toward capital discipline if prices fall too close to their break-evens,” said Brew.

“The Western international oil companies are fairly well-hedged against a downturn … as most have spent the last cycle investing in greenfield projects with very low breakevens.”

ExxonMobil, TotalEnergies, Shell and Chevron have maintained their 2025 spending guidance, but BP has cut its forecast by $500 million.

Gulf oil companies and their Western peers are also partnering in various projects.

Aramco, which has deals with two US liquefied natural gas projects, said last week it had signed 34 initial agreements with American companies, although this number includes earlier announcements around LNG. 

However, a non-binding agreement to explore investment in Woodside’s US LNG project is new.

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In the UAE, ExxonMobil, Occidental and EOG Resources will partner with Adnoc for “expanded oil and natural gas production” valued at $60 billion, the White House said last week.

During President Donald Trump’s visit to the UAE, Abu Dhabi’s Supreme Council for Financial and Economic Affairs awarded a new concession for unconventional, harder to extract oil exploration to US independent producer EOG Resources. 

In addition, Adnoc said it would explore working with US company Occidental to increase the capacity of their joint Shah gas facility by 30 percent. Occidental owns 40 percent of Shah, one of the largest and most complex sour gas processing plants in the world. It is located about 210km southwest of Abu Dhabi city, close to the border with Saudi Arabia.

Sour gas contains significant amounts of hydrogen sulphide and is highly toxic and corrosive.

Adnoc also said it would work with partners ExxonMobil and Japan’s Inpex/Jodco in the Upper Zakum offshore oil field to expand production there as part of the potential $60 billion US investment.

“The big Gulf NOCs are the crucial providers of funds to government budgets,” said Jim Krane, research fellow at Rice University’s Baker Institute. “Adnoc, Aramco and KPC [Kuwait Petroleum Corporation] are the linchpins of national security.”