Annual oil and gas industry capital expenditures will need to rise to meet demand

Published on June 10, 2024 by Dave Kovaleski

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Due to increasing demand and inflation, annual upstream oil and gas capital expenditures will need to rise by 22 percent by 2030 to ensure adequate supplies, according to a new report by the International Energy Forum and S&P Global Commodity Insights.

The Upstream Oil and Gas Investment Outlook report, published by IEF and S&P, said a cumulative $4.3 trillion in new investments will be needed between 2025 and 2030, as demand for oil is anticipated to rise from 103 million barrels per day (bpd) in 2023 to nearly 110 million bpd by 2030.

“More investment in new oil and gas supply is needed to meet growing demand and maintain energy market stability, which is the foundation of global economic and social wellbeing,” Joseph McMonigle, secretary general of the IEF, said. “Well-supplied and stable energy markets are critical to making progress on climate, because the alternative is high prices and volatility, which undermines public support for the transition as we have seen in the past two years.”

The report found that global upstream oil and gas capex is expected to grow by $24 billion this year, surpassing $600 billion for the first time in a decade. However, annual investment will need to grow by another $135 billion, or 22 percent, to $738 billion by 2030 to ensure enough supply.

Further, more than 60 percent of the projected increase in upstream capex between now and 2030 would be focused in the Americas.

However, the report noted some uncertainty around the trajectory for global oil and gas demand due to the pace of the energy transition to net zero CO2 emissions.

“Base-case forecasts from consensus-leading organizations diverge by as much as 7 million bpd for 2030 and this gap widens to 27 million bpd when more ambitious climate scenarios are included,” the report said.

The report was authored by Allyson Cutright, senior energy market analyst at the IEF; Roger Diwan, vice president at S&P Global Commodity Insights; and Karim Fawaz, director of the Energy Advisory Service at S&P Global Commodity Insights.

“Expected production declines and future demand growth will require re-investing existing cash flows even as the transition proceeds,” Diwan said.

The International Energy Forum is the world’s largest energy organization, with 73 member countries accounting for 90 percent of the world’s energy market.