Upstream oil and gas ‘needs more annual investment’

Reuters/Anton Vaganov/Pool

• Exploration and production sector
• Calls for spending rise of 22%
• Opec and IEA spat continues

Annual capital expenditure for exploration and production in the upstream sector of the oil industry needs to increase by 22 percent by 2030 because of growing demand and cost inflation, experts say.

A cumulative $4.3 trillion needs to be invested between 2025 and 2030, according to a report by the International Energy Forum (IEF) and S&P Global ratings agency.

To achieve this, they calculate that the average annual increase would need to rise by $135 billion to $738 billion. 

The 2030 estimate is 15 percent higher than a year ago and 41 percent higher than two years ago, primarily due to rising costs and a stronger demand outlook.

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S&P and IEF forecast oil demand to grow from 103 million barrels per day (bpd) in 2023 to nearly 110 million bpd by 2030, then to plateau and remain above 100 million bpd by 2050.

The uncertainty around the demand trajectory and the pace of the energy transition “creates a difficult environment for making investment decisions”, the report says.

It adds that annual oil and gas upstream capital expenditure grew by $63 billion year on year in 2023 and is expected to rise by $26 billion this year.

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More than 60 percent of the increase in upstream capex spent between now and 2030 will come from the Americas.

The International Energy Agency (IEA) forecast on Wednesday an oil glut equating to 8 million bpd by the end of the decade as production is increased. Demand is likely to peak by 2030, it said. 

However, Opec secretary general Haitham Al Ghais criticised the IEA on Thursday, saying that the Agency’s “narratives for oil are dangerous, especially for consumers”. 

“Peak oil demand is not on the horizon,” Al Ghais said. 

Opec predicts oil demand to grow by 2.2 million bpd in 2024, whereas the IEA sees a slowdown in demand to only 1 million bpd.

“We have heard similar types of narratives before that have proven [to be] wrong,” Al Ghais said in an open letter, calling the IEA’s scenario “unrealistic”.