LUKOY PJSC Lukoil (CE)

By Jaime Llinares Taboada

Oil and gas prices have recovered from last year's lows, but companies are holding back from raising their investment budgets too much, a report by RBC Capital Markets suggests.

Capital expenditure across the global oil and gas supply chain is expected to modestly increase in 2021 from a year earlier, but will remain well below 2019 levels, according to the Canadian bank.

The 2021 investment budget for the 190 oil and gas companies RBC analysts track totals $348.0 billion. This is up 4% from $334.7 billion in 2020, when the industry slashed spending as lockdowns and other coronavirus-induced restrictions hit fuel demand and prices. However, the 2021 capex forecast is 25% lower than the $461.7 billion spent in 2019, the report says.

"Companies continue to hold the line on spending and activity with many staying steadfast on maintenance plans through the remainder of 2021," RBC said.

Ten national oil companies, such as Saudi Arabian Oil Co. and PetroChina Co., are expected to spend a combined $170.35 billion this year, up 12% from 2020 and 3.4% below 2019 levels.

Conversely, integrated oil majors appear to prefer to hold a tight purse. BHP Group Ltd., BP PLC, Chevron Corp., ENI SpA, Equinor ASA, TotalEnergies SE, Galp Energia SGPS SA, Royal Dutch Shell PLC, Repsol S.A. and Exxon Mobil Corp. have an aggregated capital expenditure plan of $78.21 billion for 2021, according to RBC. This is 1% higher than $77.82 billion last year, and 29% lower than $110.03 billion in 2019.

"Reinvestment frameworks, boosted shareholder return/debt reduction plans and service cost pressures provide guardrails to 2022 spending increases which we expect results in most companies targeting maintenance/modest growth rates next year," RBC said.

Write to Jaime Llinares Taboada at jaime.llinares@wsj.com; @JaimeLlinaresT

(END) Dow Jones Newswires

August 20, 2021 07:18 ET (11:18 GMT)

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