Global Oil and Gas Firms to Cut Capex in 2026, Limit Clean Energy Spend to 30%

Oil and gas firms are expected to cut capital expenditures in 2026, with a reinvestment rate averaging 50% and shareholder distributions pegged at 45% of operating cash flow. The report projects Brent crude to average $59.50 a barrel in 2026. European majors will limit renewable and low-carbon investments to 30% of total budgets, while most IOCs and NOCs will converge at 10-20% allocations. Structural cost reductions will remain a priority, with companies simplifying organizations and deploying AI-enabled efficiency measures to boost margins and counter macroeconomic uncertainty.

Oil and gas companies are bracing for a challenging 2026, with capital expenditures expected to decline significantly. According to Wood Mackenzie's new Corporate Strategic Planner Oil and Gas 2026, companies will maintain disciplined investment criteria while navigating substantial headwinds Wood Mackenzie discloses oil and gas companies need to ...^[1]. The report projects a reinvestment rate averaging 50%, enabling firms to return an average of 45% of operating cash flow to shareholders. This approach prioritizes financial strength and balance sheet discipline over long-term growth investments.

The forecasted Brent crude price for 2026 is just under $60 per barrel, with companies focusing on preserving cash flow and balance sheet strength. European majors are expected to cap renewable and low-carbon investments at 30% of their total budgets, while most international oil companies (IOCs) and national oil companies (NOCs) will allocate 10-20% of their overall budgets to low-carbon initiatives. This shift in capital allocation reflects a broader trend of reducing spending on low-return projects and redirecting funds towards upstream investments.

TotalEnergies, a French oil major, has announced it will scale back its share buyback program in 2026, citing an uncertain economic and geopolitical environment. The company's board has approved quarterly buybacks worth between $0.75 billion and $1.5 billion, depending on Brent crude prices and exchange rates TotalEnergies considers smaller buybacks in 2026^[2]. This decision underscores the industry's focus on maintaining a strong balance sheet and a gearing ratio below 20%.

In contrast, Indian state-held Oil and Natural Gas Corporation Limited (ONGC) is planning to expand its renewable energy portfolio. The company aims to buy up to 2.5-3 gigawatts (GW) of renewable energy projects, adding to its existing capacity of around 2.5 GW India’s Top Oil Producer Plans to Buy Up to 3GW of Renewable Energy^[3]. ONGC's push into renewable energy comes amidst a broader trend of European majors scaling back their commitments to clean energy.

Structural cost reductions will remain a priority for oil and gas companies in 2026. Efforts to simplify organizations, reduce headcount, and deploy AI-enabled efficiency measures will intensify, aiming to boost margins and hedge against macroeconomic uncertainty.