Oil majors near inflection point as spending rises

Looking forward, the uptick in spending on offshore is a sign that the oil majors feel confident they can begin greenlighting new projects even in a world of price volatility. "With the level of capital spending in 2018 expected to increase by 5% compared with 2017, it looks like the industry is gradually moving into a growth phase," Muktadir Ur Rahman wrote. Ironically, this is occurring as U.S. shale is beginning to slowdown.

The resurgence in FIDs for new oil and gas projects around the world could lead to cost inflation all over again. Laid off workers have left the industry altogether. The slack in the services sector will disappear as projects pickup. Meanwhile, tariffs on steel and other components could add to project costs as well.

The Apex report says that in order to keep costs in check, "the industry needs a new business model, one that encourages greater collaboration and appropriate risk-sharing to prevent the recurrence of the runaway cost escalations of the past."