(EnergyAsia, February 13 2014, Thursday) — In an attempt to hold down rising cost, the international oil majors are expected to reduce capital expenditure (capex) from 2013’s US$270 billion by 20% over the next two to three years, predicts UK consultant Douglas Westwood.

This would equate to about 7% of the total industry’s annual upstream capex, which will be achieved through cutbacks in investments in Arctic, deepwater and LNG projects.

“For several years we have been voicing our concerns over a tide of issues facing the oil majors. Firstly it seems that their oil production has peaked, then one year ago we noted that the spiralling capital expenditure was unsustainable,” said analyst Steve.Robertson.

“It is now happening. Hess’s 2014 spend is to be 30% lower than that of two years earlier, Shell is reducing by 20% compared to 2013, BG’s is also set to fall and BP’s Bob Dudley has stressed the importance of ‘capital discipline’.”

However, national oil companies and small independents will more than offset the major’s reduced spending as they account for the remaining 93% or more than US$650 billion in the industry’s projected capex this year.

The “highly innovative” independents have been responsible for the surging onshore production of US shale-based oil and gas while state-owned players like Saudi Aramco are committed to long-term programmes as well as contracts for equipment and services.

According to the latest Barclay’s Capital survey, the state-owned companies will boost their spending by 11% this year as they continue their programme to “drill more and more holes for less and less oil.

Douglas Westwood said oilfield services companies that are unprepared or do not have diversified offerings and client base will be impacted by the cutback in high capex projects.