With a backdrop of softening commodity prices and reduced transition pressures, 2026 is likely to see continued capital discipline, selective M&A activity and investment focused on regions offering best ‘bang for buck’, writes Luke Kanczes, Head of Oil and Gas at Gneiss Energy.
(This article first appeared in Energy Voice.)
Softer commodity prices, disciplined capital allocation and a shift toward near‑term value creation look set to shape investment behaviour across oil, gas and low‑carbon markets this year.
Brent crude entered 2026 anchored in the mid‑$60/bbl range, extending the price softness seen throughout 2025. This has reinforced a sector‑wide focus on efficiency, risk management and targeted growth.
We expect to see the following trends:
- Price weakness will drive renewed capital discipline
Lower oil prices remain the defining market characteristic as 2026 begins. Global upstream capex is expected to decline around 5% versus 2024, with operators prioritising capital preservation, project phasing and balance sheet strength.
While oil‑related capex is trending downward, gas investment presents a counterbalance, forecast to rise roughly 7% year‑on‑year due to sustained demand from power generation, industrial activity and LNG markets.
This broader shift mirrors 2025 dynamics, when capital discipline became the dominant theme among international E&Ps. Exploration spend was channelled into a limited set of high‑impact basins such as Namibia, Brazil and Guyana, while major oil companies increasingly focused on capital‑light optimisation and near-field development opportunities rather than new frontier commitments.
- A more selective but still active M&A landscape
Despite subdued deal volumes relative to the peaks of 2021, M&A will remain an important strategic lever in 2026. Market participants are emphasising portfolio optimisation, tax‑driven structuring and strategic joint ventures. This continues the pattern observed in 2025, when activity skewed toward concentrated corporate exits, targeted divestments and farm‑downs, particularly across Europe, Africa and Asia‑Pacific.
On the upside, large‑scale transactions still remain possible, particularly as several Majors evaluate non‑core international businesses. However, the more notable shift is the rise of strategic partnerships. Examples such as Eni–Petronas (Indonesia/Malaysia), BP–Eni’s Azule in Angola and joint venture models emerging in the North Sea (Shell-Equinor, Ithaca-Eni, NEO-TotalEnergies) illustrate how operators are increasingly using collaboration to generate tax and other related synergies and manage cost, risk and basin exposure.
- Investment focus shifts to regions offering ‘bang for buck’
With cost discipline at the forefront, operators in 2026 are concentrating on barrels that deliver the greatest returns within the shortest timeframes. We expect to see brownfield expansions, near‑field tie‑backs and the increasing use of AI to optimise operations and maximise recovery.
Global FIDs, already lower in 2025, are likely to remain broadly flat. Regions offering clear value, fiscal stability and infrastructure proximity stand to attract disproportionate investment. This includes the Middle East, parts of West Africa, and mature basins such as Norway.
AI‑driven subsurface interpretation and operational analytics will enable operators to boost recovery factors while limiting incremental cost, another key differentiator in a $60/bbl oil world.
- Regional dynamics will shape capital flows
- North Sea (UK & Norway): The UKCS continues to consolidate as fiscal and regulatory uncertainty weighs on investment. Tax losses and decommissioning relief are expected to underpin dealmaking. Norway remains comparatively resilient with robust project pipelines, though inflationary pressure presents challenges.
- Sub‑Saharan Africa: Strong near‑term production growth, particularly in Nigeria and Angola, combined with renewed licensing activity will make the region a focal point for both independents and NOCs.
- MENA: With vast low‑cost reserves and improving fiscal conditions in markets such as Egypt, the region will remain core to global upstream strategy. Gas development momentum is expected to accelerate, supported by major LNG expansion plans.
- Southeast Asia: Consolidation and NOC–IOC partnerships are shaping a new investment cycle. Infrastructure‑led developments and reforms across Vietnam, Malaysia and Indonesia will underpin a more disciplined approach to FIDs.
- Latin America: Fiscal reforms and portfolio reshaping, particularly in Argentina, Brazil and Guyana, are fostering a more attractive environment for both offshore exploration and onshore consolidation. The potential reintegration of Venezuelan production adds another layer of opportunity.
- Equity markets remain tough for E&Ps
Last year, AIM and LSE markets saw limited liquidity, low valuations and, outside of a few notable exceptions, a scarcity of sizeable equity raises, a trend expected to continue into 2026. The relative discount to asset value remains more pronounced in London than in other major exchanges, pushing companies further toward alternative markets, private capital, structured financing and debt alternatives.
- Energy transition pressures ease
Finally, while long‑term decarbonisation remains part of corporate strategy, 2026 will see a continuing recalibration of priorities. Several Majors scaled back near‑term renewables budgets in 2024–25 and are refocusing on core oil and gas portfolios, emphasising emissions‑efficient production instead of large‑scale renewable generation.
Upstream emissions intensity among the Majors has continued to decline, even as overall production has increased, reflecting the growing adoption of electrification of operations, carbon capture initiatives and lower‑emissions project design.
