Global oil and gas investments will increase more than 4.3 per cent yearly to reach $628 billion this year as the industry recovers from the pandemic and from the hurdles posed by the Omicron variant, according to a report by consultancy Rystad Energy.
The increase in investment will largely be pushed by a 14 per cent year-on-year rise in upstream gas and liquefied natural gas investments in 2022, the independent energy research and data analytics company said.
Upstream gas and liquefied natural gas will be the fastest-growing part this year, with investments rising to nearly $149bn, from $131bn in 2021. This falls short of the pre-pandemic total but investment in the sector is expected to surpass the 2019 levels of $168bn in two years, reaching $171bn in 2024, Rystad said.
Upstream oil investments are projected to rise 7 per cent yearly to $307bn in 2022. However, the midstream and downstream investments will fall 6.7 per cent on annual basis to $172bn this year.
The pervasive spread of the Omicron variant will inevitably rule to restrictions on movement in the first quarter of 2022, capping energy need and recovery in the major crude-consuming sectors of road transport and aviation, Rystad Energy’s head of energy service research, Audun Martinsen, said.
“But despite the current disruptions caused by [the] Covid-19, the outlook for the global oil and gas market is promising,” he said.
Global shale investments are expected to surge 18 per cent to reach $102bn this year, almost $16bn more than last year, Rystad said.
The offshore investments are set to reach $155bn, up 7 per cent yearly, while traditional onshore will jump 8 per cent to $290bn this year, it said.
This year’s investment growth is very much “pre-programmed” by the $150bn worth of greenfield projects sanctioned last year, up from $80bn in 2020, Rystad said.
Approving activity in 2022 is likely to mirror last year’s levels, with a similar amount of project spending to be unleashed in the short to medium term, it said.
Global oil need is expected to plateau by the mid-2030s. Crude is expected to keep the biggest part of the international energy mix until 2045, as the world’s population increases and the global economy more than doubles in size to $270 trillion, Opec said in its World Oil Outlook 2021 report in September.
need is forecast to rise by 17.6 million barrels per day in two and a half decades, growing to 108.2 million bpd in 2045 from 90.6 million bpd in 2020, according to Opec.
Regionally, Australia and the Middle East stand out in terms of investments, Rystad’s report showed.
Investments in Australia are expected to rise 33 per cent owing to the greenfield gas developments. In the Middle East, investments will rise 22 per cent this year as Saudi Arabia contributes its oil export capacity and Qatar expands production and LNG export capacity, Rystad said.
The consultancy, though, pointed out that an “noticeable concern” in 2022 is execution challenges related to the pandemic and increased inflationary costs for steel and other input factors.
“These are likely to make operators mildly careful regarding meaningful capital commitments … major offshore operators are being challenged on their portfolio strategy as the energy change unfolds, with many exploration and production companies already directing investment budgets to low-carbon energy supplies.”
For offshore contractors, the energy change could be advantageous for wind strength developments.
Spending in the offshore wind sector reached almost $50bn last year, double the 2019 levels. By 2025, Rystad expects offshore wind investments will rise to $70bn as need for clean energy surges.
By contrast, the offshore oil and gas sector is set to confront a challenging energy change period. Oil need is likely to peak in the next five years, capping offshore investment at about $180bn in 2025.
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