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, a new report revealed.
According to a new report by the International Energy Forum (IEF) and S&P Global Commodity Insights, a cumulative $4.3 trillion in new investments will be needed between 2025 and 2030. This is based on an outlook projecting oil demand to increase from 103 million barrels per day (bpd) in 2023 to nearly 110 million bpd by 2030.
Investments critical for energy market stability
“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,” he added.
Capex to grow 22 percent to $738 billion by 2030
The “Upstream Oil and Gas Investment Outlook” report found that global upstream oil and gas capital expenditure 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 adequate supply.
Re-investing cash flows critical
According to Roger Diwan, vice-president 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.”
Read more: OPEC Secretary General: Oil industry calls for $11.1 trillion in investments by 2045
Americas to drive over 60 percent of capex growth
Additionally, over 60 percent of the projected increase in upstream capex between now and 2030 would be focused in the Americas, with the United States, Canada, Brazil, and Guyana being the largest drivers.
Uncertainty around energy transition pace
The report further noted significant uncertainty around the trajectory for global oil and gas demand and the pace of the energy transition to net-zero CO2 emissions. However, it concludes that increased capital expenditure in upstream oil and gas supports energy security and the energy transition.
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