With concerns of a softening oil market, we expect global upstream investment to remain flat or even fall - indeed, the reported 2025 budgets to date show a 3-4% drop. This doesn't mean companies won't pursue new projects, but only the best will pass strict hurdle rates. We estimate spend north of $50 billion will be allocated to new greenfield projects, similar to this year, potentially unlocking over 8 bnboe of reserves.
The most high-profile development that could be sanctioned is TotalEnergies' Venus project in Namibia. We also anticipate a wave of multi-tcf gas developments will move forward - in the Eastern Mediterranean, Chevron could sanction Leviathan Phase 2 (Israel) and Aphrodite (Cyprus), while Eni may take FID at Cronos (Cyprus). New gas projects are also in Southeast Asia, like Eni's Geng North and INPEX's Abadi LNG (both Indonesia).
We expect year-on-year M&A activity to remain relatively steady. Most deal-making (as usual) will occur onshore North America, in the US and Canada, with consolidation remaining an underlying theme. But given the levels of large-scale activity that have taken place, especially in the Permian, a certain level of asset high-grading can also be expected as the buyers optimize their portfolios. Activity in other basins, like the Bakken, may start to pick up.
Consolidation will continue to be a theme as companies seek scale and it has just been confirmed that Kosmos is in talks regarding a possible takeover of Tullow. We expect the NOCs of the Middle East to continue their international acquisition drive, and we may also see bp and Shell, both of whom have pivoted their strategies back towards oil & gas, chasing opportunities. There are plenty of opportunities with the likes of Chevron and Occidental executing multi-billion dollar divestment programs.
The 2025 LNG market will remain supply-constrained, keeping prices elevated, as Asian and European demand growth outpaces the gradual start-up of new, mostly North American, liquefaction trains. Growth will remain muted as the latest wave of liquefaction trains only begin ramping up and we forecast just ~30 MMtpa of new capacity will have started by end-2025.
The two largest new projects are the initial trains at Venture Global's Plaquemines LNG in the US and Shell's LNG Canada, the country's first export project. Additional supply will come online in Australia, Mexico and West Africa. Potential FIDs in 2025 include TotalEnergies' Papua LNG project in Papua New Guinea, Eni's Coral North FLNG in Mozambique and INPEX's Abadi LNG project in Indonesia. President-elect Trump's agenda includes ending the current pause on US LNG non-FTA export permits, which could propel Venture Global's CP2 LNG development and Sempra Energy's fourth train at Cameron LNG to FID. Woodside is also targeting FID at its Louisiana LNG project in Q1 2025.
The competition for upstream investment will grow, with countries pulling levers from fiscal terms to regulatory streamlining to attract E&Ps. In 2025, oil and gas producing countries will continue their intense competition to attract upstream dollars. Although IOC and NOC budgets have steadily grown post-COVID, the investment pool is still limited compared to previous years. Some producer countries have reacted by lowering entry requirements and making their fiscal and contractual regimes more attractive.
We have seen Argentina, Brazil, Trinidad & Tobago, Egypt, Angola, Nigeria, Indonesia and Malaysia, just to mention a few examples, introducing fiscal incentives and regulatory changes in 2024. It's important to note that in most cases, these changes are part of a wider policy rather than isolated actions. We envisage that this trend may be replicated by other countries that are lagging and need to take bold actions to reactivate their E&P sectors.
Some E&Ps are adjusting their energy transition targets to enable continued investment in oil & gas. The challenging economics of many new energies projects has ultimately manifested in shareholder pressure. And this had led to leadership changes at certain companies with bp's appointment of Murray Auchincloss, who has reprioritized oil & gas, and Shell's restructuring under Wael Sawan to focus more on hydrocarbons. E&Ps will retain decarbonization targets, but adjustments are expected - for example, some will set emission intensity-based targets, allowing more flexibility to invest in hydrocarbons.
Companies will only work on the best energy transition projects, selling or cancelling those at the tail end. With 69% of projects in our CCUS coverage still in the announcement phase, 2025 might be the year where we see an industry-wide opportunity high-grading. Under the second President Trump term, the United States is expected to prioritize oil and gas, focusing on reducing regulations. But we expect existing incentives, such as those from the Inflation Reduction Act, to remain, and the permitting processes for ongoing CCS projects may be expedited.