Will big players face output struggle?

It is common knowledge that the world's major players in the energy markets have struggled during the financial crisis, but Credit Suisse have announced further bad news for the leading oil producers - they expect the major US and European integrated oil companies to struggle to boost output to 2020, saying the sector is unlikely to see any volume growth over the coming cycle.

However, the brokerage also said that Chevron is the only one of the major players where it sees the potential for volume to stay flat or even increase slightly over the coming cycle to 2020.

Reuters quoted analysts led by James Neale saying on September 17, "When we talk about growth in the sector, we mean upstream oil and gas production growth: this is where 70 percent of the capital is employed and where 90 percent of expansionary capex is deployed."

Credit Suisse upgraded Chevron to "outperform" from "neutral", saying its production showed good near-term oil weighting with contributions from major low-decline projects. It raised its price target to $80 from $70.

The brokerage said most of the major players have failed to deliver their promises on volume growth. Analysts said, "Mature decline rates, project delivery timing, maintenance, and weaker demand (for natural gas mostly) have all played their part in this."

Credit Suisse said net production growth will be very tough for companies in the regions of Europe and North America, given the ongoing problem of decline in demand, and the pressures to sanction new growth projects before these declines set in.

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