Companies operating in the upstream segment of the oil and gas industry have been observing capital discipline in recent years while undertaking exploration and production activities. This approach is aimed at maximising shareholder value while enhancing operational efficiency. This has directed capital allocation towards low-cost, high-value assets and has played a part in the execution of acquisitions and divestments as well. Besides these, companies are also trying to navigate through a potential market oversupply scenario, accelerating digitalisation, and balancing decarbonisation with energy security while finalising their capital spending plans for 2026 and beyond.
Moreover, external developments, particularly regarding geopolitical conflicts and disputes, continue to weigh in on global energy supplies and hence have a bearing on investments as well. Since 2022, the Ukraine conflict and the resultant sanctions on Russia have caused a sizable disruption in global energy trade. Russian oil infrastructure, especially midstream assets and refineries, has come under increasing drone attacks from Ukraine, leading to their temporary closure for repairs. Earlier, attacks on vessels plying the Red Sea coast of Yemen amid the Israel-Hamas conflict had diverted maritime traffic, including oil tankers, around Africa.
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In this scenario, it was imperative to understand from our readers the key factors determining upstream oil and gas investments in 2026. For this, GlobalData conducted a poll during January and February 2026 that garnered 206 responses. Over 40% of the respondents indicated that geopolitics was the biggest determinant for making decisions on upstream investments. This sounds logical as energy assets are a prime target during wars and other conflicts. For instance, in September 2019, a drone attack specifically targeted oil infrastructure at Abqaiq and Khurais in Saudi Arabia, impacting around 5% of global supplies. In 2026 alone, the US executed an operation in the oil-rich Venezuela for the removal of its president. Tensions are also at an all-time high between the US and Iran, which could spark a conflict in the Middle East and disrupt energy supplies from the critical Strait of Hormuz.
A little over a quarter of the respondents opined that crude oil price volatility was an important factor in influencing the capital plans for upstream operations. Lately, companies are focusing on high-return, low-cost assets, prioritising operational efficiency and shareholder returns over production growth. These objectives are accounted for while deciding on investments for the short to medium term. Continued volatility is pushing companies toward localised supply chains and increased investment in regional assets, resulting in a narrow, more streamlined geographic footprint.
A third set of respondents, around 20%, felt that energy transition policies were a key element in planning for upstream investments. Pressure from environmental groups and governments to reduce emissions is driving investments in carbon capture, utilisation, and storage (CCUS) and low-carbon technologies, making decarbonisation a key component of new projects. Sustainability is now a core financial control. Projects are vetted for their methane intensity, and high-emission ones tend to get divested to optimise the overall carbon footprint.
Lastly, around 11% of the survey participants indicated that technology and automation play a major role in deciding on upstream investments. Use of artificial intelligence (AI), machine learning, and advanced analytics is growing rapidly as companies look to improve exploration success rates, reduce drilling costs, and optimise production.
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By GlobalData