Annual upstream oil and gas investment will have to increase to $640 billion by 2030 from $499 billion in 2022 to provide adequate global supplies, the International Energy Forum (IEF) and S&P Global Commodity Insights said in a new report.
Capital expenditure rose 39 percent year-on-year in 2022 to $499 billion, the highest level since 2014.
However, drilling remained below pre-pandemic levels as inflation impacted spending. The number of drilling rigs increased by 22 percent last year but was still 10 percent below 2019 levels.
“While we ramp up investment in renewables and pursue the energy transition, we also need to lift investment in oil and gas to support the global economy and protect the quality of life for everyone,” said Joseph McMonigle, Secretary General of the IEF.
A cumulative $4.9 trillion will be needed from now until 2030 to meet market needs, even if the growth in oil and gas demand slows down.
“Underinvestment in oil and gas threatens energy security and stalls progress on climate goals by increasing reliance on more carbon-intensive options,” McMonigle stated.
Middle East highlights
Current global spare production capacity is at only 2.0-2.5 million barrels per day; nearly all of it is held by Saudi Arabia and UAE, the report noted. With a few notable exceptions, Gulf producers typically maintain a buffer to increase production in unexpected supply outages and emergencies.
Saudi Arabia plans to increase capacity to 13.2 million barrels per day from their current 12.2 million barrels per day by 2027
UAE plans to expand to 5 million barrels per day from 4.2 million barrels per day) by 2027.
However, actual production increases for Saudi Arabia and the UAE will depend on OPEC+ policy and their desire to maintain their traditional safeguard.
Momentum around a revival of a JCPOA deal has waxed and waned over the past year. The return of Iran’s oil to the market remains highly uncertain. If a deal was reached, Iran may return 1.3 million barrels per day to the market in fairly short order and drawdown and sell 70-90 million barrels from storage almost immediately.