After recent declines, upstream capital spending is showing signs of recovery. In 2018, global upstream capital spending is thought to have grown by around 9%1, and is expected to increase in each of the next few years. The Middle East has remained robust through the downturn and, in 2018, upstream capital spending returned to the peak levels of 2014, while global upstream capital spending remains 37% below the 2014 peak (see the chart below).
Major investment plans in many of our core markets remain intact. For example, the Kuwait Petroleum Corporation expects to invest US$500 billion through to 2040 to boost production, whilst the Abu Dhabi National Oil Company has a five-year capital expenditure plan of more than US$130 billion (of which approximately US$45 billion is earmarked for downstream developments). We also see an increased drive to develop gas resources in markets such as Algeria, Iraq, Saudi Arabia and the UAE, borne out by the fact that upstream gas projects account for 55% of our 2019 Engineering & Construction bidding pipeline.
Significant increases in upstream capital spending in 2019 are also expected in regions such as the CIS, Africa and Asia Pacific, where we already have a physical presence and strong relationships. The success of our organic growth strategy in such markets was demonstrated in 2018 through a further contract win in Turkey, three EPC contracts in India, and our first major project in Thailand.
1 IHS Markit Global Upstream Spending Report, December 2018
Our strategic priorities are to focus on our core, deliver organic growth and reduce capital intensity.