Global upstream operators will cut investment for a second consecutive year in 2026.
Capital expenditure is expected to fall by at least 2 - 3% year-on-year as the industry navigates sub-US$60/bbl oil prices while maintaining focus on long-term resilience, according to a report released today by Wood Mackenzie.
The report identifies five key themes that will shape the upstream sector in 2026 as operators balance capital discipline with strategic portfolio positioning for the 2030s.
A second year of moderate spending cuts and sharper efficiency focus: global upstream CAPEX will decline more than 5% compared to 2024 levels. Reductions in North America and Europe will offset increases in Africa, Latin America and the Middle East. Oil investment takes the hit, falling 5-6%, while gas spending grows 7%.
Despite these pressures, non-OPEC liquids and global gas supply will each grow by around 1.5%. Guyana will reach the one million barrels per day milestone. Brazil and Argentina will also deliver strong growth. The US will dominate the global gas growth story.
Major project sanctions are expected to average 20 or below in a third consecutive year of muted activity. Spending commitments will be delayed if prices fall further.
AI integration will accelerate across the sector. Operators are implementing advanced tools for scenario planning, subsurface analysis and operational execution. These could deliver tangible gains in recovery factors, unit cost savings and project optimisation.
Operators will add material new growth opportunities: operators will continue adding upstream assets to portfolios with an eye on the 2030s. The Middle East and North Africa will see 20 billion boe potentially become available through licensing rounds and contract negotiations.
Libya will hold its first bid round in 17 years. Iraq, Kuwait, Oman and Syria will offer significant opportunities. Syria's licensing round marks its first since the Assad era and the lifting of sanctions.
West Africa will host multiple licensing rounds, including Nigeria, Equatorial Guinea, Angola, Sierra Leone and Congo-Brazzaville. Namibia, Liberia and Gabon will pursue the direct negotiations route.
US shale operators will pursue international opportunities in the Middle East, Latin America and North Africa. This follows successful unconventional entries by Continental and EOG in Turkey, Argentina and Bahrain.
Brownfield rejuvenation and recovery factors will gain prominence: existing assets will receive increased focus as operators pursue AI-driven improvements to recovery factors. ADNOC added 1.2 billion boe to reserves through advanced AI and seismic technologies in December 2025, and it won’t be alone. Other portfolios will see gains in 2026.
In the US Lower 48, ExxonMobil's petcoke proppant technology will be implemented in half of its Permian wells, while Chevron will expand deployment of proprietary downhole chemicals.
Current shale recovery factors average around 10%. ExxonMobil's aspirational target is to double this rate, representing a gross potential upside of 20+ billion boe. A prize of this size is currently aspirational, but there will be more clarity on progress in 2026.
New deals, new upstream business models and new partnerships: the joint venture model will evolve from single-country partnerships to regional collaborations across multiple countries. PETRONAS and Eni will finalise their NewCo joint venture in Asia. Additional partnerships will emerge in Malaysia and Indonesia.
The UK North Sea will see increased joint venture activity following recent budget measures, as operators pursue tax and operational efficiencies.
Cross-border partnerships between US and international companies will span multiple deal formats. These include asset swaps, cost-carries and corporate M&A. Gulf of Mexico operators will seek longer-dated growth while international companies target producing barrels and deepwater expertise.
Key inflections that matter in the world’s "dominant" hotspot: US tight oil output will decline by 200 kb/d in 2026 — the first contraction without a market crash. The US accounts for more than one-fifth of global oil and gas supply and upstream investment. It is also home to two-thirds of global upstream M&A. This makes the shift significant for international markets.
Growing demand from LNG and data centre power requirements also changes the desirability of owning US gas assets. Mature gas basins in the Rockies will be revisited to uncover additional supply opportunities and gas-focused M&A is expected to overtake tight oil deal spending.
"Operators face the dual challenge of near-term price weakness while positioning for longer-term demand growth," said Fraser McKay, Head of Upstream Analysis at Wood Mackenzie. "Capital discipline and cash flow constraints will continue to define upstream spending decisions. But operators will doggedly pursue cost efficiency, increasingly including AI / ML tools, to further improve unit costs, increase recovery factors and optimise execution. They will also innovate in business development terms, through joint ventures, carry agreements and integration, driven by the need to maintain a competitive edge”.