Oil and Gas Trends

Upstream Industry Highlights

Permian Basin Drives U.S. Oil Output Growth in 2025: The Permian Basin remains the primary engine of U.S. oil and gas production growth, projected to account for nearly 49% of total U.S. crude output in 2025. Production is expected to rise by 4–5% compared to 2024, even as rig counts remain below post-COVID highs. This growth is attributed to continued efficiency gains, enhanced drilling technologies, and expanded pipeline takeaway capacity for associated natural gas.

Slower but Steady Production Growth Forecasted: While the Permian will continue to lead, overall output growth is expected to slow in 2025. Industry forecasts estimate an increase of about 250,000–300,000 barrels per day, down from last year’s growth, as operators focus on capital discipline and maximizing returns to shareholders. The U.S. Energy Information Administration projects Permian crude production will reach 6.6 million barrels per day in 2025.

Technology and Efficiency Gains Offset Declining Rig Counts: Despite a declining rig count, operators are achieving more production per rig thanks to advanced drilling techniques like longer laterals, multi-well pads, and AI-driven efficiency improvements. These innovations are helping to offset natural decline rates and extend the productive life of mature fields.

Industry Consolidation and Competitive Pressures Intensify: Mergers and acquisitions continue to reshape the upstream landscape, with major players like Chevron planning to increase Permian output by up to 10% in 2025. Smaller operators are facing heightened competition and pressure to maintain efficiency, while day rates and drilling activity are stabilizing amid moderate oil price forecasts in the high $60s to low $70s per barrel.

Trump Administration’s 2025 Tariffs: A New Era for Upstream Oil & Gas

The upstream oil and gas sector is navigating a dramatically altered trade landscape in 2025 as the Trump administration’s sweeping new tariffs take effect. While crude oil, natural gas, and refined petroleum product imports are specifically exempt from these new tariffs, the measures are significantly reshaping the cost structure for steel, equipment, and other critical inputs.

What’s Changed?

• Universal 10% Tariff: As of April 5, 2025, a 10% tariff now applies to nearly all imports into the United States (with the exception of crude oil, natural gas, and refined petroleum products), under President Trump’s executive order invoking the International Emergency Economic Powers Act (IEEPA).

• China-Specific Tariffs: Imports from China, Hong Kong, and Macau now face a 125% reciprocal tariff as of April 10, 2025, on top of any existing duties.

• Steel and Aluminum: The administration has reimposed a 25% tariff on steel (potentially up to 50% for Canada and Mexico with stacking), with strict North American origin requirements for steel and aluminum used in energy infrastructure.

• Retaliation: China has ceased imports of U.S. crude and LNG, and is redirecting LPG purchases to the Middle East, negatively impacting U.S. shale producers. The EU and other trading partners are also rolling out retaliatory tariffs.

• Canada and Mexico: While USMCA-compliant goods are exempt, most other imports from Canada and Mexico face a 25% tariff, with some reductions and exemptions for specific products.

Impact on Upstream Operations

While the direct cost of imported crude, gas, and refined products remains unchanged, the cost of steel, equipment, and certain chemicals has risen sharply—squeezing margins and slowing drilling activity. U.S. oilfield service firms are reporting 2–3% revenue declines in 2025 due to tariff-driven cost inflation, with even larger impacts on operating profits.

Key effects include:

• Higher Drilling and Completion Costs: Steel tariffs alone can add $1–2 million to the cost of a deepwater well.

• Supply Chain Disruptions: Retaliatory tariffs and shifting trade flows are complicating procurement and logistics.

• Margin Pressure: With oil prices under pressure, the ability to absorb or pass on these costs is limited.

• Global Trade Shifts: The trade war is reshaping LPG and NGL flows. Chinese buyers are substituting U.S. LPG with Middle Eastern supply, reducing demand for U.S. shale byproducts and pressuring prices for U.S. producers

BPO: A Strategic Response to Tariff Pressures

The Trump administration’s 2025 tariffs—25% on steel, 10% on most imports, and up to 125% on Chinese goods—have sharply increased costs for upstream oil and gas companies. Business process outsourcing (BPO) helps offset these pressures by cutting back-office expenses 30–40% through outsourcing functions like land administration, accounting, and compliance, freeing up capital for core operations.

In addition to cost savings, BPO offers flexibility by turning fixed overhead into variable costs, allowing companies to scale support with market conditions. Outsourcing partners also provide advanced technology and regulatory expertise, helping upstream firms navigate complex tariff rules efficiently and maintain focus on drilling and production.

How BPO Helps

• Cost Reduction: Outsourcing non-core functions (land administration, accounting, regulatory compliance) can cut back-office costs by 30–40%, directly countering the impact of higher input costs.

• Scalability: BPO converts fixed costs into variable ones, allowing companies to adjust quickly as market conditions and tariff regimes evolve.

• Access to Expertise: BPO partners bring specialized knowledge and advanced technology, streamlining compliance and reporting in a fast-changing regulatory environment.

• Focus on Core Operations: By delegating administrative burdens, upstream teams can concentrate on drilling, production, and innovation.

Case Example

A Permian Basin operator facing $4.2M in annual tariff-related cost increases (steel, drilling equipment, and Chinese-manufactured sensors) partnered with a BPO firm to overhaul its back-office operations. The results:

Source: Adapted from IFS case studies.

By outsourcing land administration, production accounting, and IT, the operator reallocated $2.7M annually to drilling optimization and tariff-resilient supply chain partnerships. The BPO provider’s centralized systems also enabled faster revenue recognition, improving cash flow during a period of softer oil prices.

Key Takeaways for Upstream Leaders

• The Trump administration’s 2025 tariffs are fundamentally reshaping the cost structure of the upstream oil and gas sector, with steel, equipment, and supply chain costs all rising sharply—even as crude, gas, and refined product imports remain exempt.

• BPO offers a proven path to offset these pressures, delivering immediate cost savings, operational flexibility, and access to best-in-class expertise.

• Companies that act now can turn today’s trade headwinds into a competitive advantage, preserving capital and maintaining focus on growth.

Note: Energy commodity imports are exempt from the new tariffs, but the sector is still deeply affected by higher input costs, global trade shifts, and retaliatory measures. Upstream leaders should prioritize operational resilience and cost efficiency to navigate this new landscape.