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Spending on oil and gas exploration and production needs to rise dramatically to avoid global supply shortages, says a new report published by commodity and energy market analysts.
Annual investment needs to rise 28 per cent to reach $640 billion by 2030, according to the report by the International Energy Forum (IEF) and S&P Global Commodity Insights.
“The energy future must be secure and affordable, as well as sustainable,” said Daniel Yergin, vice-chairman of S&P Global. “Adequate investment that avoids shortages and price spikes, and the economic hardship and social turbulence that they bring, is essential to that future.”
A cumulative $4.9 trillion in spending is needed from 2023 until 2030 to meet demand for oil and gas, says the report.
The International Energy Agency (IEA) expects world oil demand this year will reach an all-time high of 102 million barrels per day. The IEA projects oil demand will still be 102 million barrels per day in 2030, even with growing renewable and alternative energy supply.
Meanwhile, the global natural gas market is in crisis, in part as a result of Russia’s invasion of Ukraine, the IEA says. Countries in Europe and beyond are turning back to coal as a result of reduced gas supplies and higher prices.
World natural gas demand is expected to continue rising, reaching 4.4 trillion cubic metres in 2030 compared to 2.2 trillion cubic metres in 2021, the IEA says.
“Underinvestment in oil and gas threatens energy security and stalls progress on climate goals by increasing reliance on more carbon-intensive options,” said Joseph McMonigle, secretary general of the IEF.
“As we saw last year, high energy prices and volatility have disastrous effects on households all over the world, hitting the poorest people the hardest.”
If countries wish to avoid the problems connected to energy shortages, they need to send clear signals about future demand, build and maintain sufficient inventories, support long-term offtake contracts, and prevent destructive policies, wrote IEF and S&P Global analysts.
The report says governments should base energy policies on realistic demand.
“We don’t yet have viable alternatives to oil and gas to power heavy industry, food production or plastics,” says McMonigle.
This article was first published by the Canadian Energy Centre (CEC). Read more from the CEC here.