$4.9 trillion
cumulative investment between now and 2030 is required to meet
market needs and avoid supply shortfalls, report says
NEW
YORK, Feb. 16, 2023 /PRNewswire/ -- Annual
upstream oil and gas investment needs to rise by 28 percent to
reach $640 billion by 2030 to ensure
adequate global supplies, according to a new report published by
the International Energy Forum (IEF) and S&P Global Commodity
Insights™, the leading independent provider of information,
analysis and benchmark prices for the commodities and energy
markets.
Capital expenditure in 2022 rose by 39 percent from the previous
year to $499 billion, the highest
level since 2014, but drilling remained below pre-pandemic levels
as inflation ate away at the spending, according to the report. The
number of drilling rigs rose by 22 percent in 2022, but this 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.
The recovery in 2022 marked a change from the previous two
years, when capital expenditure slumped with the COVID-19 pandemic
contributing to a tightening of global energy markets, price spikes
and shortages of natural gas.
"The global economy continues to need adequate and reasonably
priced hydrocarbon supply alongside the scaling up of renewables
and low-carbon technologies," said Daniel
Yergin, Vice Chairman of S&P Global. "The energy future
must be secure and affordable, as well as sustainable. Adequate
investment that avoids shortages and prices spikes, and the
economic hardship and social turbulence that they bring, is
essential to that future."
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, the report says.
"As we saw last year, high energy prices and volatility have
disastrous effects on households all over the world, hitting the
poorest people the hardest. Underinvestment in oil and gas
threatens energy security and stalls progress on climate goals by
increasing reliance on more carbon-intensive options," said Mr.
McMonigle.
The report says that if consumer countries wish to support
markets they would need to send clear signals about future demand,
building and maintaining sufficient inventories, supporting
long-term offtake contracts, and preventing prohibitive
policies.
Meanwhile, producers can support markets by promoting
investment, it says. Operators need a certain level of
assurance and fiscal certainty to invest in capital-intensive,
long-cycle projects. They will be increasingly constrained in
committing capital, or will require higher returns to do so, as
risks evolve, the report says.
"Future supply must clear an acceptable hurdle rate that
accounts for policy uncertainty, variable oil and gas prices, and,
increasingly, carbon price assumptions," the report says.
Additionally, governments should base policies on realistic
energy demand outlooks and to ensure adequate and affordable energy
supplies during the transition, the report says. "Governments need
to ensure assumptions do not underestimate energy demand growth
coming from the 80 percent of the global population in the
developing world," it says.
Mr. McMonigle said: "We don't yet have viable alternatives to
oil and gas to power heavy industry, food production or plastics.
So, the transition to a carbon neutral economy is challenging and
will take time and innovation. Even as we invest in new
technologies to cut greenhouse gas emissions, we also need to
invest in oil and gas during the transition."
The report's authors are Roger
Diwan and Karim Fawaz from
S&P Global Commodity Insights and Mason
Hamilton and Allyson Cutright
at the IEF. The full report is available at:
https://ief.org/ogir
About the IEF
The International Energy Forum is the world's largest energy
organization, with 72 member countries accounting for 90 percent of
the world's energy market. The IEF is the global home of energy
dialogue promoting energy security, market stability and
transparency. For more information visit www.ief.org.
Media Contacts:
S&P Global: Jeff Marn
+1-202-463-8213, Jeff.marn@spglobal.com
S&P Global Commodity Insights, Global/EMEA: Paul Sandell +
44 (0)7816 180039, paul.sandell@spglobal.com
Americas: Kathleen Tanzy + 1
917-331-4607, kathleen.tanzy@spglobal.com
Asia: Melissa Tan
+ 65-6597-6241, melissa.tan@spglobal.com
About S&P Global Commodity Insights
At S&P Global Commodity Insights, our complete view of
global energy and commodity markets enables our customers to make
decisions with conviction and create long-term, sustainable
value.
We're a trusted connector that brings together thought leaders,
market participants, governments, and regulators and we create
solutions that lead to progress. Vital to navigating commodity
markets, our coverage includes oil and gas, power, chemicals,
metals, agriculture, shipping and energy transition.
Platts® products and services, including the most
significant benchmark price assessments in the physical commodity
markets, are offered through S&P Global Commodity
Insights.
S&P Global Commodity Insights is a division of S&P
Global (NYSE: SPGI). S&P Global is the world's foremost
provider of credit ratings, benchmarks, analytics and workflow
solutions in the global capital, commodity and automotive markets.
With every one of our offerings, we help many of the world's
leading organizations navigate the economic landscape so they can
plan for tomorrow, today. For more information visit
https://www.spglobal.com/commodityinsights.
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