- Improving upstream sentiment comes at a time of high geopolitical tensions, and both supply and demand concerns, setting 2025 up to be a year of mixed messages.
Wood Mackenzie recently released the Global Upstream: 5 things to look for in 2025 report. Key themes to watch for include: the increased focus on efficiency, resource capture being back in vogue, strategic M&As, Americas liquids growth outside the Permian, a new wave of LNG projects.
Upstream intensely focusses on efficiency
“This focus is not a new phenomenon, but operators will progressively lean more heavily on artificial intelligence (AI) and other sophisticated tools to optimise costs, production and revenues,” said Fraser McKay. “The risk of global tariffs and softer prices adds impetus.”
Resource capture is back in vogue
According to the report, increasing confidence in a higher-for-longer demand outlook for oil and gas is forcing upstream companies to revisit portfolio longevity.
“Sentiment towards upstream investment will continue to improve, tempered only by near-term macro headwinds,” said Robert Clarke. “Investors will pay more attention to reserves and resource lives than in the last decade, and companies will look to reload their hoppers.”
Trends will include the resurgence of conventional exploration, increased activity, albeit with capital discipline, and deals providing more immediate resource capture boost. It could also be a breakout year for global unconventionals, with key opportunities in Saudia Arabia’s Jafurah basin, Argentina’s Vaca Muerta and Algeria.
M&A high on agendas
The trend of M&A activity will not go away, however, given the wave of consolidation in 2023/2024, the sector is unlikely to top the US$130 billion annual M&A has averaged over the last decade. Yet for the same reasons operators will increase organic resource captures, M&As will help with portfolio longevity and meet demand outlooks.
“We will still see plenty of activity in the US as Independents look to expand in markets outside of the Permian,” said Clarke. “Euro and US Majors will also be keen to bolster post 2030 cash flow. Mega-deals are possible, but rare. Many NOCs will continue to be active, most notably in the Middle East, China and Southeast Asia.”
Americas liquids growth more than just the Permian
Despite concerns around near-term oil demand and potential oversupply, projects in the Americas will deliver relatively robust growth of roughly 1 million b/d in 2025, the same level as 2024.
The Permian slows again and is projected to add 300 kb/d of crude and condensate versus 450 kb/d in 2024. More robust growth will be seen in other regions, with Latin America adding an impressive 400 kb/d of liquids. Deepwater Gulf of Mexico will have a stand-out year as well, adding capacity of more than 300 kb/d of liquids and touching 2 million b/d for the first time.
New Wave of LNG projects could take shape
“We expect 2025 to be a quiet year for upstream LNG FIDs,” said McKay. “This is, in part, due to service sector squeeze and rising costs, but that doesn’t mean projects won’t progress.”
“A wildcard might come from US tariffs, which could force China to retaliate, such as importing less US LNG, making new project approval acceleration a moot point. Asian LNG buyers could acquire US Lower 48 upstream gas positions as part of wider value-chain plays.”
Visit Wood Mackenzie’s upstream content hub for the entire report and regional reports.
Author: Bryan Groenendaal
