Energy Capital Expenditure Wave of 2026: AI, Exploration, and Global Fracking Opportunities

Overview

This report is Goldman Sachs' 23rd annual Global Oil & Gas Top Assets Review, focusing on trends in hot projects in 2026. The report notes that as the industry transforms towards artificial intelligence and digitalization to rebuild reserve life, signs of a recovery in exploration success have emerged. Shale technology is being promoted globally, setting the stage for another wave of energy capital expenditure. Despite expected slower non-OPEC supply growth after 2027, project profitability has recovered significantly, with deepwater and LNG projects becoming key investment focuses.

Core views

Key views from the report include: Artificial intelligence and digital technologies are reshaping the upstream oil and gas industry, primarily benefiting deepwater exploration (due to better seismic imaging) and the globalization of shale technology (enhanced drilling efficiencies). Exploration activity, which had been depressed for years, is beginning to recover, with a 2025 success rate hitting five-year highs. Over the past three years, discovered reserves have grown by 20% compared to the previous three years, with Galp, ENI, and BP excelling in exploration success. US shale oil production growth is decelerating, expected to grow at mid-single digits levels in 2027-28, with the Permian Basin contributing over 90% of incremental growth. Meanwhile, shale technology is expanding globally, with projects in Vaca Muerta, Argentina, and Jafurah, Saudi Arabia, anticipated to contribute nearly 270,000 barrels per day of liquids growth by 2030, representing almost one-fifth of global oil demand growth. Oil and gas capital expenditure is projected to return to double-digit growth in 2027 (11%), largely driven by deepwater projects. New projects in regions such as Brazil, the Gulf of Mexico, West Africa (Nigeria, Angola), and Namibia will accelerate development. LNG project cost support remains at $11.3 per million BTU, with new project costs significantly lower than during the peak periods of 2015-16. Non-OPEC supply growth is expected to peak in 2027 and then gradually slow down to around 1 million barrels per day in 2028, further declining to 50-60 million barrels per day in 2029-30. UAE's exit from OPEC boosts non-OPEC growth data, but overall supply growth faces structural downward pressure. Project internal rate of return (IRR) has risen from 12-15% during the 2010-16 period to over 20% currently.

Analysis framework

Goldman Sachs analyzes through its Top Projects database, covering 516 large-scale new oil and gas development projects, including traditional developments (offshore, onshore) and unconventional ones (shale, heavy oil, GTL). Key metrics analyzed include reservoir life cycle, project economics, capital expenditure trends, and production growth forecasts. Analysis methods include: 1. **Project Lifecycle Analysis**: Tracking changes in the lifespan of top projects’ reserves, showing a decline of 60% since 2014, with an average lifespan now of 20 years. 2. **Exploration Success Assessment**: Evaluating exploration performance by calculating the value created by each company’s exploration activities over the past decade. 3. **Capital Expenditure Forecasting**: Analyzing upstream capital expenditure trends, projecting a 11% increase in 2027 and a 6% increase in 2028. 4. **Regional Growth Modeling**: Building models of project growth in various countries and regions, forecasting contributions to production growth from 2025-30. 5. **Project Economic Comparison**: Analyzing different project types’ investment returns using break-even price curves.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Supply/Demand Framework

  Analyzing global oil and gas supply and demand changes to predict price and investment trends, considering factors like non-OPEC supply growth, deepwater project launches, and LNG demand impacts on market equilibrium

• Company Fundamentals & Financial FrameworkFree cash flow analysis

  Free Cash Flow Analysis

  Assessing oil and gas companies' cash flow performance following improved capital discipline, analyzing the relationship between capital expenditure and free cash flow, and evaluating market preferences for high reinvestment companies

• Industry/Sector Analysis FrameworkCost curve analysis

  Cost Curve Analysis

  Building cost curves for oil and gas projects to analyze supply capabilities at different break-even prices, identifying projects and regions with cost advantages

• Cycles & Recessions FrameworkCapacity/Equipment Cycle

  Capacity/Equipment Cycle

  Analyzing the relationship between upstream capital expenditure cycles and capacity construction cycles, predicting the rhythm and scale of future supply growth

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• International Oil Companies

  Benefiting from deepwater projects and exploration technology advancements

  Strengths

  High-quality deepwater assets, strong exploration capabilities, improved capital discipline

  Weaknesses

  Shorter reservoir lifespans requiring continuous investment to maintain production

  Comparison

  Stronger technological capabilities compared to NOCs and independent E&P companies

  Risks

  Price volatility risk, geopolitical risks

• US Shale Oil Companies

  Facing slowed growth but leading in technology

  Strengths

  Advanced shale development technology, high operational efficiency

  Weaknesses

  Limited growth potential, facing pressure on capital returns

  Comparison

  Advantaged over global shale projects in terms of early entry

  Risks

  Capital expenditure constraints, environmental policy risks

• Service Companies

  Benefiting from capital expenditure growth

  Strengths

  Improved industry consolidation, higher utilization and pricing power

  Weaknesses

  Significant cyclical fluctuations, dependent on upstream investment

  Comparison

  Higher barriers to entry compared to historical cycles

  Risks

  Volatility in downstream investment, technological update risks

Key data

• Top Projects Reservoir Lifespan20 years (2026E)Down 60% from 2012 levels of 55 years
• Exploration Success Increase20%20% increase over the past three years compared to the previous three years
• Shale Project Growth270 kboedIncremental growth in Argentine and Saudi shale projects by 2030
• Oil & Gas Capex Growth11%Double-digit growth projected for 2027E
• LNG Cost Support$11.3/mcfSupport level for new project cost curves

Impact & implications

The report concludes that the energy industry is at the start of a new investment cycle, with improved capital discipline reawakening the market for growth-oriented investments. AI and digital technologies will boost exploration and development efficiency, reducing project costs. Global shale technology will diversify the US dominance, enhancing global energy supply security. The LNG market will experience a rebalancing process, with new projects gaining competitiveness. For oil and gas companies, those with high-quality deepwater and shale assets will enjoy stronger competitive advantages, and companies with strong exploration capabilities will gain more value creation opportunities.

Risks

• Price volatility may impact project economics
• Geopolitical risks affect project development
• Changes in environmental policies impact fossil fuel investments
• Technological risks could cause project delays or overspending
• Supply chain tensions push up project costs

What to watch

• FID progress of deepwater projects in 2027-28
• Growth speed of US shale oil
• Changes in LNG supply and demand balance
• Persistence of exploration success rates
• Execution of capital expenditures