The world’s largest national oil companies (NOCs) and supermajors are planning over $375 billion of ambitious investments through the down cycle, despite ongoing concerns around oil demand, according to a new analysis from Ernst & Young.

The report, 'Investing for the upturn,' will be publicly launched at the ongoing NOC Congress in Abu Dhabi, which runs till June 4. Ernst & Young is a sponsor of this year’s NOC Congress, which it has supported for the last three years.

According to the E&Y report, the largest NOCs are on course to invest over $275 billion in the development of their businesses at home and abroad in 2009. Of this, 70 per cent of total investments will come from national oil firms in Asia and South America.

Based on current estimates by 2015 the largest NOCs will have invested around $600 billion in their hydrocarbon sectors.

The supermajors have also committed to substantial investment in oil and gas activities this year – around $100 billion, according to Andy Brogan, global oil and gas transaction advisory services leader at Ernst & Young and author of the report.

'NOCs and the supermajors continue to show a real determination to push ahead with their major capital expenditure plans this year, at least for now. 2008 was a record year for capital investment by the sector and 2009 is shaping up to be another record year.'

'Companies are wary of finding themselves in a position where they have to play catch-up on investment when the upturn materializes.'

He pointed out that despite the International Energy Agency's (IEA) current estimates for oil demand, investment is still required in production capacity enhancement projects to offset falling output due to natural field depletion.

“Most oil and gas companies have indicated that they will spend more than half of their capital investment on upstream operations.”

Powerhouses

The economic slowdown, a dramatic fall in oil prices and investors’ flight from risk have left many reserve rich state-owned oil and gas companies less able to finance projects with surplus cash flows.

Some NOCs are looking at cost-cutting measures, while countries such as Indonesia are introducing stimulus packages to aid the sector, the study added.

Many reserve holders’ ambitions to expand overseas are also being scaled back in order to prioritise domestic projects. However, substantial financial commitments are still being made for oil and gas projects in China and Brazil.

Brazil is set to become a major producer following pre-salt discoveries by Petrobras, which plans to invest $28 billion in pre-salt areas as part of its $174 billion business plan to 2013 – around 90 per cent of its total investment will be targeted at projects in Brazil.

The investment allocated by Petrobras for 2009 represents 38 per cent of the planned $91 billion expenditure by South American NOCs this year, according to the Ernst & Young, with Asian NOCs collectively to invest more than $98 billion, almost half ($42 billion) of which has been allocated by China’s CNPC.

By comparison the combined capital expenditure of NOCs in Africa, CIS and the Middle East is a fraction of that of their Asian and South American counterparts put together.

The report calculated that the NOCs of Africa announced $21 billion of investment this year compared to $36 billion for the CIS and $29 billion for the Middle East.

Don Painter, leader of Ernst & Young's Middle East Oil & Gas Practice, said, 'While public figures suggest that the investment Middle East NOCs have committed to this year is below the levels of NOCs in Asia and South America, there is still plenty of cash available in the Middle East for the right type of investment.'

'Cash rich GCC producers are currently evaluating investment