Big Oil Companies Set For Production Increase Into The 2020s

Projects will kick in and cash flow will improve beginning next year, say experts.

New projects coming on line and acquisitions will contribute to the world's seven biggest oil companies growing production by about 9 percent between now and 2018 and enjoying continued growth into the 2020s, according to several sources.

Lydia Rainforth, analyst for Barclays, told Reuters that "There are a lot of projects coming on stream over the next three years that will support cash flow and ultimately dividend."

These include Statoil's Johan Sverdrop oilfield off Norway and Eni's Zohr gas development off the Egyptian coast, as well as other undertakings that majors cleared while enduring the worst of the market downturn.

Rainforth calls 2017 "the sweet spot" for integrated companies, pointing out that it took several years for them to adjust to dramatically lower oil prices, and that "a lot of the efficiencies introduced in recent years will roll into 2017, when projects kick in and free cash flow will improve."

Companies in the midst of prepping new projects include France's Total, which intends to clear the Libra offshore oilfield in Brazil, the Uganda onshore project and the Papua LNG project by 2018, for production after 2020.

Brendan Warn, analyst for BMO Capital Markets, predicted that of all the majors, Shell will see the strongest growth over the next two years at 8 percent.

Warn also said that as companies continue to clear new projects, modest production growth will continue after 2020: "We won't see 5 to 10 percent growth that we've seen from companies in recent years: it will be closer to 1 or 2 percent."

The majors are hardly the only entity exhibiting confidence about what most analysts think will be a shaky next few years for the market: Sri Mulyani Indrawati, finance minister for Indonesia, told CNBC she is optimistic that her country will receive a Standard & Poor's rating upgrade this year despite oil being below $50.

Like the majors, Indonesia has weathered the market downturn using a variety of initiatives, in its case programs to boost infrastructure spending, opening up the private sector, and reform taxation.

Indrawati said, "We already have put in a budget of around $40-$45 and (at) that level, we're looking at all the situation in the supply side of the oil and gas, as well as the demand side, I'm comfortable with that level."

Seemingly optimistic too despite the prospect of oil in the mid $40s is Scott Sheffield, chairman and CEO of Pioneer Natural Resources Co., who told Bloomberg last week that the break even price for drilling in the Permian Basin in Texas is "sub-$30" per barrel.