Oil industry needs trillions in investment, says Opec chief

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• Upstream sector ‘needs $11.1trn’
• Investments ‘crucial ‘ to energy security
• More projects expected this year

The global oil and gas industry needs trillions of dollars in investment to sustain stable supply and meet growing energy demand, the secretary general of Opec has warned.

Haitham Al Ghais said this week that the upstream sector needed more than $11 trillion, the downstream sector would need just under $2 trillion, and the midstream sector would need over $1 trillion to be injected by 2045.

“Allocating more investments in the oil industry will contribute to promoting the sustainability of the global energy sector, securing sufficient and reliable supplies for the world as a whole, and ensuring secure supplies for future generations,” Al Ghais said.

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The oil industry investments were crucial to ensure global energy security and emission reduction, he said.

Earlier this month, Opec’s 2024 outlook forecast that demand will grow by 2.2 million barrels per day (bpd), year on year. The International Energy Agency (IEA) estimated that global crude market supplies will shift from a surplus into a deficit in 2024 because of the improved outlook for the US economy and Opec maintaining its output cuts.

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The IEA predicted that world oil production will increase only 800,000 bpd to 103 million bpd, including a downward adjustment as a result of Opec+ output cuts.

The UAE energy minister, Suhail Al Mazrouei, pointed out last October that the Opec+ group has lost 4 million barrels per day of oil production in three years, as a result of underinvestment in the oil sector.

Still, the IEA  estimates that Opec’s total spare capacity amounts to more than 5 million bpd.

Aditya Saraswat, Mena research director at Rystad Energy, told AGBI: “There is a significant concern about underinvestment but, at the same time, there is surplus capacity able to address any eventual immediate shock. It is more about structural decline in the long term.”

Saudi Arabia has paused plans to raise oil output capacity, but industry observers say the UAE, Kuwait and Iraq are gearing up for expansion as they focus on longer-term commitments.

Abu Dhabi’s state oil company, Adnoc, has increased planned spending to $150 billion by 2027.

In the short term, the winds are changing towards upstream oil and gas and natural investments, according to industry experts. 

The global consultancy Wood Mackenzie said in a report that upstream final investment decisions in the oil industry, with a focus on deepwater resources, are due to increase in 2024 as project economics rebound.

Up to 30 upstream projects of more than 50 million barrels of oil equivalent could reach final investment decisions this year, an increase from 22 projects last year and equivalent to a total of $125 billion in investments.

Ross McGavin, principal analyst at Wood Mackenzie, said: “With many projects delayed or postponed, we expect operators to commit to more projects in 2024 than last year.”

McGavin said that national oil companies in the Middle East would drive growth. “The majors will be busy as well, particularly as they prioritise advantaged deepwater resources,” he said.

Rystad expects offshore investment activity to grow in the coming years “as long as there is a good pricing environment.”

As the number of projects rises, their breakevens are projected to fall, while the returns are expected to bounce back this year.

Countries with the most offshore activities last year included Norway, UAE, Brazil, Guyana, and Mexico in 2023. Saraswat said: “This year, the UAE and Qatar are expected to lead in the region.”