Growing Demand to Increase Upstream Oil & Gas Investment Needs 22% by 2030

Rhea-AI Summary

The International Energy Forum and S&P Global Commodity Insights report that upstream oil and gas capital expenditures must rise by 22% by 2030 due to increasing demand and cost inflation. This equates to a cumulative $4.3 trillion investment required from 2025 to 2030. The report forecasts oil demand to grow from 103 million barrels per day (bpd) in 2023 to nearly 110 million bpd by 2030. Annual investment needs to increase by $135 billion to $738 billion by 2030 to ensure sufficient supply. The Americas, particularly the United States, Canada, Brazil, and Guyana, will be major drivers of this capex growth. The report also highlights uncertainty in global oil and gas demand forecasts and emphasizes the importance of energy security and a balanced transition to net zero CO2 emissions.

Positive

• Projected 22% increase in upstream oil and gas investments by 2030.
• Forecasted growth in oil demand from 103 million bpd in 2023 to nearly 110 million bpd by 2030.
• Expected global upstream oil and gas capex to exceed $600 billion in 2024 for the first time in a decade.
• More than 60% of upstream capex growth focused in the Americas, with significant expansions in Brazil and Guyana.
• Increased capital expenditure supports energy security and the energy transition.

Negative

• Significant uncertainty in global oil and gas demand forecasts for 2030, with a potential gap of 27 million bpd in ambitious climate scenarios.
• Need for a cumulative $4.3 trillion in new investments between 2025 and 2030, posing financial challenges.
• Expected production declines necessitate reinvestment of existing cash flows, which may strain financial resources.

Insights

Financial Analyst

The report's projections for a 22% increase in upstream oil and gas investments by 2030 have significant implications for the industry and investors. The cumulative investment of $4.3 trillion between 2025 and 2030 highlights the extensive capital requirements. For retail investors, this indicates potential high growth opportunities in the upstream oil and gas sector, particularly in the Americas, as these regions are expected to drive most of the capex growth. However, it's essential to remain cautious about the significant uncertainty regarding future demand and the pace of the energy transition. Investors should closely monitor oil prices, cost inflation and regulatory developments. Short-term, there might be positive impacts on stock prices of companies poised to benefit from increased investments. Long-term, the industry's stability will depend on balancing supply with demand amidst evolving energy transition policies.

Energy Market Analyst

The anticipated increase in capex underscores a critical need to maintain a stable energy market despite the push towards a net zero CO2 emissions future. This dual necessity for investment—meeting rising demand and supporting energy transition—poses a complex challenge. The report's suggestion that over 60% of capex growth will occur in the Americas, with significant contributions from the U.S., Canada, Brazil and Guyana, points to vital regions for potential investment focus. However, the immense divergence in demand forecasts, ranging from traditional scenarios to ambitious climate targets, adds layers of uncertainty. Investors must be wary of geopolitical risks and policy shifts that can dramatically affect market dynamics. The ongoing transition period could lead to fluctuations in stock prices and investment returns.

Climate Policy Expert

The report emphasizes that energy security is foundational to a successful energy transition, highlighting the repercussions of 'disorderly' transitions. For investors, the message is clear: robust and stable energy supplies are essential to mitigating risks associated with volatile energy markets. The potential for price shocks and shortages, as observed in the last two years, indicates that investments in upstream oil and gas remain important even as the world progresses towards cleaner energy solutions. This reality suggests a balanced investment strategy that includes both traditional and renewable energy sectors to hedge against uncertainties. The report's acknowledgment of climate scenarios and demand divergences also calls for a nuanced understanding of how different policies and technological advancements might shape the industry landscape.

RIYADH, Saudi Arabia, June 5, 2024 /PRNewswire/ -- Annual upstream oil and gas capital expenditures will need to rise by 22 percent by 2030 to ensure adequate supplies due to growing demand and cost inflation, according to a new report by the International Energy Forum and S&P Global Commodity Insights.

A cumulative $4.3 trillion in new investments will be needed between 2025 and 2030, according to the "Upstream Oil and Gas Investment Outlook" report published today. The growing capital expenditure (capex) needs are based on an outlook that sees demand for oil rising 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," said Joseph McMonigle, Secretary General of the IEF. "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. Annual investment will need to grow by another $135 billion, or 22 percent, to $738 billion by 2030 to ensure adequate supply, the report says.

Roger Diwan, Vice-President at S&P Global Commodity Insights, said that "expected production declines and future demand growth will require re-investing existing cash flows even as the transition proceeds."

More than 60 percent of the projected increase in upstream capex between now and 2030 would be focused in the Americas, according to the report, co-authored by Allyson Cutright, Senior Energy Market Analyst at the IEF, Roger Diwan, and Karim Fawaz, Director of the Energy Advisory Service at S&P Global Commodity Insights.

While the United States and Canada are expected to be the largest drivers of capex growth to 2030, Latin America plays an increasingly significant role in non-OPEC supply growth, particularly for conventional crude, with large expansions in Brazil and Guyana.

The report noted significant uncertainty around the trajectory for global oil and gas demand and 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 says.

However, increased capital expenditure in upstream oil and gas supports energy security and the energy transition, the report says.

"A just, orderly and equitable transition requires a foundation of energy security," it says. "The past two years have demonstrated the consequences of 'disorderly' transitions: price shocks, shortages, disruptions, political backlash, bitter divisions and conflict."

About the IEF

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. The IEF is the global home of energy dialogue promoting energy security, market stability and transparency. For more information visit www.ief.org.

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 leading benchmark price assessments in the physical commodity markets, are offered through S&P Global Commodity Insights. S&P Global Commodity Insights maintains clear structural and operational separation between its price assessment activities and the other activities carried out by S&P Global Commodity Insights and the other business divisions of S&P Global. 

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.

View original content:https://www.prnewswire.com/news-releases/growing-demand-to-increase-upstream-oil--gas-investment-needs-22-by-2030-302164856.html

SOURCE International Energy Forum (IEF)

FAQ

What is the expected increase in upstream oil and gas investments by 2030?

Upstream oil and gas investments are expected to rise by 22% by 2030.

How much investment is required for upstream oil and gas by 2030?

A cumulative $4.3 trillion in new investments is needed between 2025 and 2030.

What is the forecasted oil demand for 2030?

Oil demand is forecasted to rise from 103 million bpd in 2023 to nearly 110 million bpd by 2030.

Which regions will drive the growth in upstream capex?

The Americas, particularly the United States, Canada, Brazil, and Guyana, will drive the growth in upstream capex.

What are the uncertainties in the global oil and gas demand forecasts?

There is significant uncertainty with a potential gap of 7 million bpd in base-case scenarios and 27 million bpd in ambitious climate scenarios for 2030.