The investment in the global oil and gas upstream sector has increased by 39 per cent to $499bn in 2022, the highest level since 2014 and the most significant year-on-year gain in history.
This was according to a new report by the International Energy Forum and S&P Global Commodity Insights.
The report claimed that higher costs primarily drove the increase in investment. Also, the global rig count was up 22 per cent from a year ago but remained 10 per cent below 2019 levels.
However, it was revealed that annual upstream investment would need to increase from $499bn in 2022 to $640bn in 2030 to ensure adequate supplies. The estimate for 2030 was 18 per cent higher than the assessment done a year ago. The increase was due to rising costs.
The report also said that Oil and gas exploration and production were experiencing record profits, however, they prioritised returns to shareholders, share buybacks, and debt repayment.
Part of the report read, “Near-term economic headwinds weigh heavily on markets and investors. If the world enters a recession in 2023, depending on the duration and depth, it is possible that oil demand growth could remain below the trend in the next couple of years, potentially extending the post-pandemic demand stall to five years. Once economic activity recovers, it will likely be less oil demand-intensive than it would have been due to fuel switching, EV penetration, efficiency improvements, and accelerated climate policies.
The near-term demand uncertainty and the potential medium-to-long-term consequences add to investment hurdles and deterrents. However, it also provides a valuable opportunity for upstream investments to catch supply up with demand. Energy security has re-emerged as a politically strategic imperative. This has led to increased government interventionism and an important shift away from an energy abundance mindset. Governments and investors can use this as both a warning and an opportunity.”
The International Energy Forum is the world’s largest international organisation of energy ministers from 72 countries and includes producing and consuming nations.