Seven of the top global O&G companies plan to increase production this year by 398,000 bpd, the most since 2010, according to data from Rystad Energy cited by Bloomberg. And output could increase even more rapidly in 2018.

What’s interesting is that these majors are not increasing their drilling capex this year. Instead, they are benefitting from investments made prior to the oil price downturn. Reduced costs together with higher production would allow companies, including Shell and ExxonMobil, to maximize their gains from recovering oil prices, according to the report. Analysts at Sanford C. Bernstein told Blomberg that if oil prices stay above $50/bbl, 2017 could be a “break-out year, eliminating the need to borrow to pay dividends.”

Rystad estimates that the seven majors will raise production by around 670,000 bpd in 2018. Still, the agency cautions, years of underinvestment during the downturn means that these output gains could be short-lived.

“Output should start declining eventually for the majors that slowed project-sanctioning,”  Rob West, an analyst at Redburn (Europe) Ltd, told Bloomberg. “Field-by-field models suggest that’s a problem for 2020.”

Much of the expected boost will be sourced from offshore projects approved at the start of the decade when oil prices were higher, said Espen Erlingsen, VP for analysis at Rystad. These types of large projects are difficult to shut down once they get started. Key examples are Chevron’s Gorgon LNG project in Australia and Kazakhstan’s Kashagan field, in which Exxon, Eni, Total, and Shell all hold stakes and which began producing last year.

About The Author Jeff Reed

I specialize in analysis of the oil and gas sector- with emphasis on the Middle East, OPEC, and the politics of energy. I hold a BA in Political Science and MA in Theological Studies from the University of St. Thomas. Prior to a career in oil and gas journalism, I was a Roman Catholic priest serving churches in the Houston area. I also taught high school for a year in Oakland, California, and worked for two years in retail management. Among my other areas of interest are political philosophy, religion and society, culture and the arts, and philosophy.