Asia Oil & Gas:Multi-year oil capex cuts; FY16 spending down 5% yy; cautious oil services
J.P. Morgan’s global oil spending survey shows upstream oil capex down 22% y/y in 2015 – a more sharper fallthan 15% witnessed in 2009 driven largely by independent producers (down 37% y/y) and surprisingly nationaloil companies’ budgets are now down 19% y/y (see note) with international oil companies’ down 17% y/y. For2016, we provisionally see capex down 5% y/y, which may fall further should oil prices remain around currentlevels. We see no signs of a recovery for oil service work, especially in Asia and remain cautious on the sector.
In China, SOEs are likely to continue cost cutting and promoting in-house oil service divisions (see note), whilewe expect further downward pressure on pricing and activity for offshore areas in Asia.