Dec 8, 2021 - Energy & Environment

A new warning on oil investment

Reproduced from the International Energy Forum and IHS Markit; Chart: Axios Visuals

A new report concludes that global spending on oil-and-gas exploration and production needs to increase greatly in coming years to ensure adequate supplies, even as demand growth slows.

Driving the news: The Saudi Arabia-based International Energy Forum and the consultancy IHS Markit say investment should reach nearly $525 billion in 2030 to enable market balance.

The big picture: "Cumulatively, we see the need for $4.7 trillion of upstream capex over 2021-2030 to meet market needs and prevent a supply shortfall, even if demand growth slows toward a plateau," they conclude.

  • "The next two years...are critical for sanctioning and allocating capital toward new projects to ensure adequate oil and gas supply comes online within the next 5-6 years."

The intrigue: The amount of new development needed depends on the trajectory of climate policy.

  • An International Energy Agency analysis of pathways to net-zero emissions in 2050 finds that with policies enabling aggressive movement away from fossil fuels, no new oil-and-gas fields need approval.
  • Under their net-zero pathway, the average annual upstream investment in 2021-2030 would be around $365 billion annually, with the bulk in existing fields but some in new fields that were already approved.

Yes, but: Nations' current clean energy and climate policies are nowhere in the universe of what would enable that net-zero pathway.

  • Under current policies and announced policy scenarios, IEA also envisions vastly larger investment, including in new fields.
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